ons with few personal choices. An example would if a new industry was to built there, people in power decided if it fit into their plans and if it met their needs. The citizens of the country would have to carry out these commands. A country that follows this economic system is North Korea. 3) Market economy is an economy where decisions are made by all members of the society based on their own needs and desires. Citizens make their own choices through buying and selling in the market place. If a factory were to be constructed, decisions would be made by a corporation, based on whether or not profit could be made. The government might or might not be involved. A country that uses this type of an economic system is the United States. 4) In mixed economies decisions are made within a system that has aspects of both market and command economies. Governments, businesses and individuals are all included in the making of the decision. So, if there was an automobile manufacturing industry to be built there, the decision to construct a road would be made after discussions among governments, businesses and consumers. The decision would rest in the hands of any of these groups. Canada is an example of a mixed economy.
Economic sectorsThe economy includes several sectors (also called industries), that evolved in successive phases.
In modern economies, there are three main sectors of economic activity:
- Primary sector: Involves the extraction and production of raw materials, such as corn, coal, wood and iron. (A coal miner and a fisherman would be workers in the primary sector.)
- Secondary sector: Involves the transformation of raw or intermediate materials into goods e.g. manufacturing steel into cars, or textiles into clothing. (A builder and a dressmaker would be workers in the secondary sector.)
- Tertiary sector: Involves the provision of services to consumers and businesses, such as baby-sitting, cinema and banking. (A shopkeeper and an accountant would be workers in the tertiary sector.)
- Quaternary sector: Involves the research and development needed to produce products from natural resources. (A logging company might research ways to use partially burnt wood to be processed so that the undamaged portions of it can be made into pulp for paper. .) Note that education is sometimes included in this sector.
More details about the various phases of economic development follow. As this process was far from being homogeneous geographically, the balance between these sectors differs widely among the various regions of the world.
Ancient timesThe ancient economy was mainly based on subsistence farming. For most people the exchange of goods occurred through social relationships. There were also traders who bartered in the marketplaces. In Ancient Greece, when the word 'economy' arose, many people were bond slaves of the freeholders. Economic discussion was driven by scarcity. Aristotle (384-322 B.C.) was the first to differentiate between a use value and an exchange value of goods. (Politics, Book I.) The exchange ratio he defined was not only the expression of the value of goods but of the relations between the people involved in trade. For most of the time in history economy therefore stood in opposition to institutions with fixed exchange ratios as reign, state, religion, culture and tradition.
Middle agesIn Medieval times, what we now call economy was not far from the subsistence level. Most exchange occurred within social groups. On top of this, the great conquerors raised venture capital (from ventura, ital.; risk) to finance their captures. The capital should be refunded by the goods they would bring up in the New World. Merchants such as Jakob Fugger (1459-1525) and Giovanni di Bicci de' Medici (1360-1428) founded the first banks. The discoveries of Marco Polo (1254-1324), Christopher Columbus (1451-1506) and Vasco de Gama (1469-1524) led to a first global economy. The first enterprises were trading establishments. In 1513 the first stock exchange was founded in Antwerpen. Economy at the time meant firstly trade.
Early mode