The Two General Types Of Economic Systems That Exist Today Are What?

The two most commonly known economic systems today are capitalism and socialism. Obviously capitalism appears to be the most dominant given that it has been adopted by most western countries and is widely considered to be a defining feature of the American society.

• Capitalism

Capitalism is an economic system in which the manufacturing industry and service industries are mostly privately owned and are run with a view to generate profits. They generally operate in competitive markets, though some businesses are lucky enough to enjoy a complete monopoly.

Income within a capitalist system is able to take two forms - profit and wages. There is a tradition that treats rent as a third phenomenon that is distinct from either of the two I just mentioned. However, profit is what is received by a business due to the fact that they spend less and sell a product or service for more.

Often profits will be used to further expand businesses and enterprises, but is sometimes taken out of the business by the owner and used to buy a luxury lifestyle. Wages are parts of the profit that are handed out to individuals that work to help produce the profit in the first place.

• Socialism

Socialism is quite different, and it's an economic system that includes publicly owned or commonly owned means of production. It may include cooperatively owned businesses and means of production.

In terms of being a social organization, socialism is based on more cooperative social relations and self-management. It means it offers somewhat equal power relations, and aims to reduce (or even eliminate) hierarchy within the management of political affairs and the economy.

For more information on the two kinds of political and economic system there are extensive Wikipedia articles available.