Unformatted text preview: xed
economies. However, to call them both
mixed economies could be misleading. It
makes them sound alike (even identical)
when they are not. The United States has
much more free enterprise than China, and
China has much more som than the
United States; the economies of these two
nations are different. It is clearer to refer to
the United States as a free enterprise nation
and to China as principally a sot
nation, while noting some sot practices
occur in the United States and some free
enterprise practices take place in China.
Each year the Wall Street Journal and the
Heritage Foundation rank countries according to how much economic freedom and
free enterprise exist in the country. In 2005,
they scored 155 countries on a scale of 1 to 5.
The closer a country’s index of economic
freedom number is to 1, the more economic
freedom and free enterprise in the country;
the closer a country’s index of economic
freedom number is to 5, the less economic
freedom in the country.
Keep in mind that different organizations can sometimes rank countries differently as to how much economic freedom
exists in the country. We show the rankings and index numbers for selective
countries in Exhibit 2-1. (Hong Kong had
the most economic freedom and North
Korea the least.) Economic Systems: Past,
Present, and Future
Before economies were free enterprise or
sot, many were traditional economies.
A traditional economy is an economic system in which the answers to the three economic questions are based on customs,
skills, and cultural beliefs.
In a traditional economy, these customs,
skills, and beliefs are passed on from one
generation to the next. An example of a tra- EXHIBIT 2-1 Index of Economic Freedom Scores Rank Country 1
155 Hong Kong
North Korea Index of Economic Freedom Score
5.00 Source: 2005 Index of Economic Freedom, a joint publication of the Wall Street Journal and
Heritage Foundation. ditional economy is the old feudal system in
Western Europe. Under the feudal system, all
land was owned by a king. The king granted
land to nobles, who in turn granted small
plots of land to peasants to farm. The peasants kept part of what they produced; the
remainder went to the nobles and, ultimately, to the king.
Few traditional economies exist today.
Most economies today are mixed economies.
Of course, the “mixture” of free enterprise
and som often differs between nations’
What does the future hold? Will most
economies of the future be mixed economies
(as they are today)? More importantly, will
the mix between free enterprise and som in the future be the same as the mix that
exists today? For instance, if we considered a
representative mixed economy today, and
noted that it is 65 percent free enterprise and
35 percent sociali...
View Full Document
- Winter '14