Adam Smith
One of the founding fathers of modern economics. His most famous work was the Wealth of Nations (1776) - a study of the progress of nations where people act according to their own self-interest - which improves the public good. Smith’s discussion of the advantages of division of labour remains a potent idea.
Capitalist economy
An economic system organised along capitalist lines uses market-determined prices to guide our choices about the production and distribution of goods. One key role for the state is to maintain the rule of law and protect private property.
Command economy
An economic system where most factor resources are allocated by the government, with few officially sanctioned private markets (e.g. ex-Soviet bloc countries prior to their transition into market economies, modern-day North Korea and Venezuela).
Consumer sovereignty
Consumer sovereignty exists when an economic system allows scarce resources to be allocated to producing goods and services that reflect the wishes of consumers.
Sovereignty can be distorted by the effects of persuasive or misleading advertising.
Economic planning
Government policies aimed at influencing trends in the economy.
Economic system
An economic system is a network of organisations used to resolve the problem of what, how much, how and for whom to produce.
Free market
System of buying and selling that is not under the control of the government, and where people can buy and sell freely, or an economy where free markets exist, and most companies and property are not owned by the state.
Friedrich Hayek
An Anglo-Austrian economist and philosopher best known for his criticisms of the Keynesian welfare state. His approach stems from the Austrian school of economics and emphasises the limited nature of knowledge. 1899 – 1992.
Karl Marx
A German philosopher, economist and political theorist. He was a hugely influential thinker and co-authored the pamphlet ‘The Communist Manifesto’ which was published in 1948 and asserted that all human history has been based on class struggles, but that these would ultimately disappear with the victory of the proletariat. 1818 – 1883.
Mixed economy
Where resources are partly allocated by the market and partly by the government.
Planned economy
In a planned economy, decisions about what to produce, how much to produce and for whom are decided by central planners working for the government rather than allocated using the price mechanism.
Transition economies
Transition economies are involved in a process of moving from a centrally planned economy to a mixed or free market economy.
