Session 15: Why economic system matters to state?

 An economic system is described as the mode of production, exchange and efficient allocation of good and services in the society. It comprises of several institution and agencies which work simultaneously for the well-being of the state.

Economic system ensures the efficient and more equitable distribution of resources through the system of progressive taxation. In this system, proportion of taxes depend on the amount of wealth, richer the individual greater will be provision of taxes. Thus, the wealth is transferred from wealthier to the poor ones, which brings stability.

Furthermore, through property rights and land reforms the state can control the mode of the production. These laws leads to equitable allocation and increase production as land is passed to poorer tenants by land reforms while the property rights safeguard their property. Not only this, these laws aids to diminish power hierarchies by abandoning and discouraging feudalism, a potential source of tyranny and anarchy.

Economic system breaks monopolies and prohibit cartels as they can misuse the resources and creates deadweight loss in the society, thus increases the efficiency of the market. Moreover, economic agents provides competitive environment in order to stabilize the prices and reduce self-interest.  

Lastly, economic policies like tax exemption and subsidizes etc. encourages the investment and inflow of capital in the state. As capital is a critical factor in prosperity of the state thus without economic planning, policies and control a dream of successful and develop nation can’t come true.