What does an economic system encompass?

An economic system encompasses the rules governing economic governance because it defines how economic activities are organized and regulated within a society. This includes the frameworks through which goods and services are produced, distributed, and consumed. Rules governing economic governance shape the interactions between various agents in the economy, such as businesses, consumers, and governments, helping to establish the mechanisms of trade, property rights, investment, and taxation.

Understanding these rules is crucial because they determine how efficiently resources are allocated and how equitable the distribution of wealth is within an economy. While social movements, the distribution of labor, and technological advancements play important roles within an economy, they are influenced by and operate under the broader structure established by the rules of economic governance. Thus, recognizing the foundational role of these rules is essential in understanding how an economic system functions holistically.