This explanation of economic power in context describes how it relates to political authority, moral values, and the law.
Societies vary in the extent to which government decision-makers – who are referred to in this book as ‘politicians’ – play a role in the management of their economies. At one extreme, under communism, the government made almost all economic decisions in a ‘command economy’. At the other extreme, in a ‘market economy’, businesses make most of the decisions. An Investopedia article, Market Economy vs. Command Economy: What's the Difference?, explains this contrast further:
· Market economies utilize private ownership as the means of production.
· In a command economy, governments own the factors of production and set prices and production schedules.
· In a market economy, prices are determined by supply and demand.
· Most nations operate as a command or market economy, but all include aspects of the other.
A government’s role in managing the economy is defined in its legal and political systems. A country's Constitution determines the extent of legal oversight of the government’s powers (5.1.3), and its political system (6.1.2) determines how people are able to pressurise a government to pay heed to their moral concerns.
The government's involvement in the economic system, and the roles of morality and the law, are explored further in the following sub-sections to put economic power in context:
· The government, using legal powers, sets the regulatory framework within which the components of an economy operate and interact with each other (3.1.2.1).
· Governments make economic transactions. They collect money in the form of taxes and spend it to deliver public services, benefits and infrastructure (3.1.2.2).
· Economic choices affect people's lives, so they have a moral aspect. Decisions made by people and businesses are affected by their moral values (3.1.2.3).
· Examples are given of how some multi-dimensional topics are treated in this book, giving links to their separate economic, moral, legal and political treatment (3.1.2.4).
(This is an archive of a page intended to form part of Edition 4 of the Patterns of Power series of books. The latest versions are at book contents).