WHAT ARE ECONOMIC INSTITUTIONS?

The term “Economic Institutions” refers to two things:

1. Specific agencies or foundations, both government and private, devoted to collecting or studying
economic data, or commissioned with the job of supplying a good or service that is important to the
economy of a country.
Examples:
• The Internal Revenue Service (the IRS—the government tax-collection agency)
• the U.S. Federal Reserve (the government producer of money)
• the National Bureau of Economic Research (a private research agency)
2. Well-established arrangements and structures that are part of the culture or society
Such as:
• competitive markets
• the banking system
• kids’ allowances
• customary tipping
And a system of property rights are examples of economic institutions.
 WHAT ARE ECONOMIC SYSTEMS?
An economic system is a societal structure for the production and exchange of goods and services, as well as the
distribution of resources.
Property ownership is an important component of economic structure since it determines who owns and
controls the means of production.
During the Industrial Revolution, there were three primary economic systems:
1. Capitalism:
• It is a type of economic system that promotes individual ownership and competition.
• Private individuals or organizations will control the money and production, and the primary purpose will be to
make a profit via commerce.
• Everyone has the opportunity to prosper or fail, and only the strongest will survive.
2. Communism:
• Communism is based on collective ownership and a planned economy in which the government controls all
decisions.
• Karl Marx established this system in 1848 when he published "The Communist Manifesto."
• In communism, everyone gets the same outcomes, no matter how hard or how little they work.
3. Socialism:
• Socialism falls somewhat between capitalism and communism, where all the means of production
are in the hands of the government but people are not paid equal wages.
• They get paid based on several factors like qualification, the difficulty of the job, social need, etc.
• In socialism, high taxes are imposed on the rich to provide more government services.