Socialism is an economic system where all the economic decisions are made by the government or a central authority. There will be no private property rights since the government officially owns all resources. It is also known as a command economy or a planned system. Socialist economics refers to the economic theories, practices, and norms of hypothetical and existing socialist economic systems. A socialist economy is based on some form of social ownership, which includes varieties of public ownership and independent cooperatives, over the means of production, wherein production is carried out to directly produce use-value sometimes, but not always, coordinated through economic planning and a system of accounting based on calculation-in-kind or a direct measure of labor-time. The term socialist economics may also be applied to analysis of former and existing economic systems that call themselves "socialist", such as the works of Hungarian economist János Kornai. Socialist economics has been associated with different schools of economic thought, most notably Marxian economics, institutional economics, evolutionary economics and neoclassical economics. Early socialism, like Ricardian socialism, was based on classical economics. During the 20th century, proposals and models for planned economies and market socialism were based heavily on neoclassical economics or a synthesis of neoclassical economics with Marxian or institutional economics.
1 Public ownership of resources
All the resources are owned and operated by the state or the government in the interest of society as a whole. This is to ensure equal opportunity of all citizens regardless of their income. Public ownership also aims to fully utilize the country’s resources. 2 Central planning authority
The central authority is responsible for making economic decisions for society. The authority plans and allocates resources between current consumption and investment for the future. 3 Price mechanism of lesser importance
Socialism gives less importance to market forces. Prices are fixed by the government and not determined by demand and supply. Private profits are not allowed and public interest is emphasized in the command economy. 4 Central control and ownership
A socialist economy is a fully planned economy where the government intervenes in all aspects of economic activity. The government controls production, consumption, and the distribution of goods and services.
Merits of Socialism
1 Production according to basic needs
Production in a socialist economy is mainly directed at producing the basic needs of the people such as food, clothing and building materials. It is not determined by the purchasing power of the rich in society. The phenomenon of the rich getting richer and the poor getting poorer does not exist in the socialist economy. 2 Equal distribution of income and wealth
There is no difference between the rich and the poor. This system provides equal opportunity for all citizens in earning an income. Wealth is also equally distributed since private enterprise is limited 3 Better allocation of resourses
Under the socialist system, the planning authority will allocate resources between current consumption and future investment. 4 No serious unemployment or recession/ inflation
The unemployment rate and inflation are usually taken care of by the government to ensure economic stability in the country. 5 Rapid economic development
In a socialism system, the economy grows faster. The main factors responsible for the rapic economic growth are the full utilization of resources, planning and quick decisions. 6 Social welfare
The government will provide all citizens of the country with full social security benefits such as pension, accident benefits and others. Since the government is concerned, labour dispute and wastage of resources do not exist in a socialism system.