Malaysian Economy

Introduction to Malaysia’s Economic System

Economy is a field of social science that studies human activities associated with the production, distribution, and consumption of goods and services in a particular geographic region. Economy is about the activities of individuals and the community making choices for the efficient use of limited economic resources such as land, labor, capital and entrepreneurs but unlimited human needs. Adam Smith, known as the father of economic, felt that economic society operated by a certain mechanism. According to Smith, each individual strives to become wealthy "intending only his own gain" but to this end he must exchange what he owns or produces with others who sufficiently value what he has to offer; in this way, by division of labour and a free market, public interest is advanced. (Adam Smith, 1977). In short, economy is the correct and effective use of available resources.

Economic system is divided into four which are the socialist economic system, capitalist economic system, mixed economic system and Islamic economic system. Mixed economy is an economy that uses both market signals and government directives to allocate goods and resources (Schiller, 2010). In a market economy, the private-sector businesses and consumers decide what they will produce and purchase, with little government intervention. In a command economy, also known as a planned economy, the government largely determines what is produced and in what amounts. In a mixed economy, both market forces and government decisions determine which goods and services are produced and how they are distributed (Gorman, 2003). Therefore, we can conclude that mixed economic system is a system where the private sector and government together to make economic decisions to solve the economic base.

Most countries, including the giant United States of America adopted a mix of economic systems as their economic system. Malaysia’s economic management philosophy itself is a... [continues]

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