The 10 types of economy and their classification criteria.

Summary of the types of economy according to various criteria: scale, degree of regulation, etc.

Economics is such a broad science that we can establish several different types of classification of its models.

Throughout these paragraphs we will be able to dwell on some of the most frequent methods of cataloguing types of economy, looking at the peculiarities that distinguish each of the types of economy according to the selected criteria..

The most important types of economy

The types of economy are quite a broad topic that can be discussed at length. Depending on the context to which we refer or the criterion we have established as a differentiator, we can obtain very different classifications. This does not mean that some are more valid than others, but that according to our needs we have to choose the one that best represents the typology we want to handle at a given moment.

1. Classification according to market systems

If the point we are interested in analyzing is the concept of ownership, the market and economic authorityWe can make a first distinction between several systems or types of economy. Let us see which ones we are dealing with.

1.1. Free market

In the first place we would find capitalism, the prevailing doctrine in most Western countries, which is characterized by the free market and the application of private property to all. the application of private property to all goods and to a large part of the available resources.. In this system, the market is regulated according to the supply and demand of a good at any given time.

The greatest exponent of this economic model would be the United States, a fervent defender of capitalism and a freely regulated market.

1.2. Socialism

On the other hand, we would find socialism, in its purest conception. It is a planned economic system in which planned economic system in which the State is in charge of intervening in the market in order to guarantee basic to guarantee basic services and goods, these being more important than the right to private property.

This doctrine has an even harsher version in communism or Marxism, where the State is not only the means of regulation but also controls all the means of production. Let us remember that this model belongs to the approaches of the purest socialism, since the socialism we find in Western countries is largely integrated in the capitalist doctrine and therefore does not intervene in the private property of individuals.

1.3. Mixed model

There is a third type of economic system, the mixed model. This model advocates maintaining a free market but under rules imposed by public administrations, so that they, and not the market itself, would be in charge of regulating the behavior of the latter.The latter, and not the market itself, would be in charge of regulating the behavior of the latter. This model is also known as Keynesianism.

1.4. Traditional economics

A final economic model is the market model. It is the one found in less complex societies. In this case, economic agents regulate themselves through the patterns established among them by their customs and beliefs.. The character of the market is also local, for a small group or society. This is the type of economy that existed in the West before the emergence of states or more complex societies.

This system is the simplest and can only respond to economic problems of little complexity. In addition, it generates a type of economic relations that limited profits, so it is also unlikely to reinvest that money in improving production processes.It is also unlikely to reinvest this money in improving production processes. We can currently find this model in very underdeveloped societies that often need the help of more prosperous countries.

2. Classification according to scope

Another way of classifying the types of economy is the one that has to do with the scope of the economy. has to do with the scope of this field. In this sense, we would find two subtypes, which would be the following.

Microeconomics

Within economics, microeconomics would be the part in charge of models that explain the behavior of individual agents, such as the companies themselves such as the companies themselves, their consumers, employees and investors. In addition, microeconomics studies how all these elements are related, shaping the market. By performing the economic analysis we would obtain data about the goods and their prices within the aforementioned market.

Macroeconomics

The other major typology that we would obtain by using this criterion is macroeconomics. This is the other type of economics and studies the behavior of economic agents. studies the behavior of economic agents on a large scale.. In this way we can analyze complex economies, check data on employment, goods produced, modes of behavior of prices in markets, resources for production or even obtain data on the balance of payments of large administrations.

Distinction according to valuation

Another way of distinguishing between different types of economics would be the objective or subjective point of view that we establish to value the different economic data. If we opt for this classification system we would obtain these models.

3.1. Positive economics

Positive economics is that which exposes the different economic issues as they are in an objective way.. In this model, no value judgments are made about the data and therefore we cannot speak of good or bad results, but rather we will present the figures in a neutral way. For example, we could mention that Spain's GDP is a certain amount of euros, but we would not evaluate whether this figure is good or bad.

The same applies to unemployment rates, the development of a certain industry, interest rates, pensions, investment in any field or, in short, any other economic data or indicator. This type of economics is used to make predictions of consequences based on the data we have. All data must be objective and verifiable, since we work with them in a neutral way.

3.2. Normative economics

In contrast, we have normative economics. Unlike positive economics, in this case, a subjective perspective is given to the economic data, and therefore we can speak of a low or high GDP, of worrying or encouraging unemployment and therefore we can speak of a low or high GDP, of worrying or encouraging unemployment data, of satisfactory or insufficient investments, or that interest rates are very good or stifling.

In contrast to positive economics, normative economics is all about is about framing the economy as it should be, not as it actually is.. Normative economics is where value judgments and therefore personal opinions come into play. Economic indicators are frequently misrepresented by different political factions, so that with the same numbers some find reasons for celebration and others for concern and blame.

4. Different models according to the terms of the definition

Academically, a further distinction is used within the types of economy that has to do with the terms we assume to define each of these models. Following this policy we can know two other different models that we will define below.

4.1. Orthodox economics

According to this distinction, the conventional model would be orthodox economics. It is the most common way of teaching economics academically.. The criteria taken into account for this model are rationality, individualism and equilibrium. According to this model, economics is presented as an exact science, so it explains the behavior of the agents involved in this field from a rational perspective.

By extension, the results must be predictable and therefore the models developed should allow us to anticipate different market behaviors.

4.2. Heterodox economics

In contrast to this rational model, we have another type of economy, the heterodox economic model. Its main pillars are the institutions, the history and the social structure of the market in question.. As opposed to the exact science proposed by the previous model, in this case we are talking about a social science and therefore subjective.

According to heterodox economics, economic agents can sometimes behave in a totally unpredictable manner, so predictive models have many limitations and we must always bear in mind that the results we have anticipated could be far removed from reality if any of the agents decide to behave differently from what we have estimated.

5. Differentiation according to theory and practice

The last distinction that we find to classify different types of economics is given by their type of performance in terms of whether it is merely theoretical or, on the contrary, practical. We would therefore have two different models.

5.1. Theoretical economics

The nomenclature is quite clear. Theoretical economics is the one that is used for the creation of different models that, on the basis of the creation of different models that, on paper, can explain the behavior of economic agents and markets..

Empirical economics

On the other hand, there is a type of economics, the empirical one, in which the different theoretical models are tested in the field in order to the different theoretical models are tested in the field in order to verify their effectiveness.. Logically, this way of acting has a limited scope, since experimentation in real environments with such a delicate element as the economy represents a series of risks that cannot always be assumed.

Bibliographical references:

• Krugman, P.R., Olney, M.L., Wells, R. (2008). Fundamentals of economics. Editorial Reverté.
• Rossetti, J.P., Rojas, M., Ordoñez, M. (1994). Introduction to Economics. Alfaomega Grupo Editor.
• Weber, M., Winckelmann, J., Echavarría, J.M. (1964). Economía y sociedad: esbozo de sociología comprensiva. Fondo de Cultura Económica.