An economy is the result of a society's culture, values, social organization, political structure and laws, as well as its geography, natural resources, and technological innovations. An economy is not one simple thing, but rather a collection of related topics that are interacting - like moving parts on a machine - that make up our reality of everyday life. We call this an economic system, or an economy. An economy determines the rules for how people trade and interact with each other. Economies are as old as civilizations, from the ancient Silk Road to modern Globalized Trade and movement of goods and information.

There are four types of economic systems, read below to find out more:

Traditional Economic System (hunter-gatherer, nomadic, early agricultural settlements)

The traditional economic system is the oldest type of economy in the world. Vast portions of the world still function under a traditional economic system. These areas tend to be rural, second- or third-world, and closely tied to the land, usually through farming. Each member of a traditional economy has a more specific and pronounced role, and these societies tend to be very close-knit and socially satisfied. However, they do lack access to technology and advanced medicine.

Command Economic System

In a command economic system, a large part of the economic system is controlled by a centralized authority or power. Usually this means the government, and often that government is controlled by one person or a very small group of people. Governments that have command economic systems typically use Authoritarian rule as part of a monarchy (one ruler) or an oligarchy (small group of rulers). Since the government is such a central feature of the economy, it is often involved in everything from planning to redistributing resources. A command economy is capable of creating a healthy supply of its resources, and it rewards its people with affordable prices, and it's elites with hefty profits. This capability also means that the government usually owns all the critical industries like utilities, luxuries, and transportation; making it subject to Authoritarian policies and regimes. Mercantilism is an example of a command economic system used by European monarchs during Colonization, where the monarch and their administration directly oversee the acquisition or production of natural resources as well as the distribution and pricing.

Market Economic System (Free Enterprise)

In a free market economy, businesses and households act in self-interest to determine how resources get allocated, what goods get produced and who buys the goods. This is opposite to how a command economy works, where the central government gets to keep the profits. There is very little government intervention in a pure market economy (“laissez-faire“ meaning "hands-off"). However, no truly free market economy exists in the world. For example, while America is a capitalist nation, our government still regulates (or attempts to control) trade and government programs in order to prevent dishonest or unfair business practices like the formation of a monopoly.

In this type of economy, there is a separation of the government and the market. This separation prevents the government from becoming too powerful and keeps their interests aligned with that of the markets. One problem with this type of economic system is that it can be subject to "boom-bust cycles" and speculation due to the reliance on people's individual choices and market forces such as supply and demand.

By the Numbers: How Economies are Measured

A society or nation's economy can be measured by putting into perspective the scale of production and trade between groups. Historical economies are studied by putting into context the amount of trade between cities, states, nations, and cultures. Today, economics is it's own field of study, and although it is not an exact science, it is often measured by things like GDP (gross domestic product), profit, revenue, debt/credit, etc. Throughout this course - in every unit - you will see "By the Numbers" sections. These sections will be dedicated to measuring the economy, cost, and interaction between different historical groups. If you are interested in mathematics; if it is one of your favorite subjects, you can explore history through the lense of mathematics.

Technology of the Times: The Engine that Drives History

Ideas about government as well as technology that helped grow cities, nations, and economies come from inventions or improvements to inventions; called innovations. If your favorite subject is science, or you are interested in figuring out mechanics or how things work, look for the "Technology of the Times" sections throughout the webpages to explore history content through the lens of science and technology.

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