Government College Gulberg for Boys

Team Members
Maham Saleem 23
Tayyaba Nazeer 23
Laiba Qadir 2309
BS Mass Communication
Subject: Sociology
Assignment#1
Economic Institutions
Submitted to: Sir Muzzaffar Iqbal
 Economic Institutions
Introduction
Economic institutions are responsible for organizing the production, exchange,
distribution and consumption of goods and services Economic institution is also
one of the basic institutions. For the sake of survival each society has an economic
system ranging from simple to complex.

Definitions
 Jonh J.Maccionis: “Economy is the social institution that organizes a
society’s production, distribution and consumption of goods and services.”
 P. Gisbert: “ the economy system is that complex of interrelated institutions
through which the economic activity of man is expressed.”
 Callhoum, Light and Keller: “the social institution that accomplishes the
goal of producing and distributing goods and services with in a society
called economic institution.”

Major Economic Institutions of Pakistan

Some major economic institutions of Pakistani society are as under:

1. Agricultural farming
2. Chemical fertilizers and its supplying agencies
3. Irrigation system- canals, tube wells and Persian wheels
4. Harvesting of crops by machines or human labour
5. Land tenure system- land ownership and tenants relationship
6. Agriculture department which provides technical guidance in mechanized
farming
7. Production, store and supplying agencies of seeds, fertilizers and insecticides
8. Agricultural sale depots, markets, flour mills and other institutions

Types of Economic Systems

There are many types of economies around the world. Each has its own
distinguishing characteristics, although they all share some basic features. Each
economy functions based on a unique set of conditions and assumptions. Economic
systems can be categorized into four main types: traditional economies, command
economies, mixed economies, and market economies.
1. Traditional economic system

The traditional economic system is based on goods, services, and work, all of
which follow certain established trends. It relies a lot on people, and there is very
little division of labor or specialization. In essence, the traditional economy is very
basic and the most ancient of the four types.

Some parts of the world still function with a traditional economic system. It is
commonly found in rural settings in second and third world nations, where
economic activities are predominantly farming or other traditional income-
generating activities.

There are usually very few resources to share in communities with traditional
economic systems. Either few resources occur naturally in the region or access to
them is restricted in some way. Thus, the traditional system, unlike the other three,
lacks the potential to generate a surplus. Nevertheless, precisely because of its
primitive nature, the traditional economic system is highly sustainable. In addition,
due to its small output, there is very little wastage compared to the other three
systems.

2. Command economic system

In a command system, there is a dominant centralized authority – usually the

government – that controls a significant portion of the economic structure. Also
known as a planned system, the command economic system is common in
communist societies since production decisions are the preserve of the government.

If an economy enjoys access to many resources, chances are that it may lean
towards a command economic structure. In such a case, the government comes in
and exercises control over the resources. Ideally, centralized control covers
valuable resources such as gold or oil. The people regulate other less important
sectors of the economy, such as agriculture.

In theory, the command system works very well as long as the central authority
exercises control with the general population’s best interests in mind. However,
that rarely seems to be the case. Command economies are rigid compared to other
systems. They react slowly to change because power is centralized. That makes
them vulnerable to economic crises or emergencies, as they cannot quickly adjust
to changing conditions.

3. Market economic system

Market economic systems are based on the concept of free markets. In other words,
there is very little government interference. The government exercises little control
over resources, and it does not interfere with important segments of the economy.
Instead, regulation comes from the people and the relationship between supply and
demand.

The market economic system is mostly theoretical. That is to say, a pure market
system doesn’t really exist. Why? Well, all economic systems are subject to some
kind of interference from a central authority. For instance, most governments enact
laws that regulate fair trade and monopolies.

From a theoretical point of view, a market economy facilitates substantial growth.

Arguably, growth is highest under a market economic system.

A market economy’s greatest downside is that it allows private entities to amass a

lot of economic power, particularly those who own resources of great value. The
distribution of resources is not equitable because those who succeed economically
control most of them.

4. Mixed system

Mixed systems combine the characteristics of the market and command economic
systems. For this reason, mixed systems are also known as dual systems.
Sometimes the term is used to describe a market system under strict regulatory
control.

Many countries in the developed western hemisphere follow a mixed system. Most
industries are private, while the rest, composed primarily of public services, are
under the control of the government.

Mixed systems are the norm globally. Supposedly, a mixed system combines the
best features of market and command systems. However, practically speaking,
mixed economies face the challenge of finding the right balance between free
markets and government control. Governments tend to exert much more control
than is necessary.

Functions of Economic Institutions

Some functions of economic institutions are given below:

1.Social Stratification
The society is divided into various classes by the distribution of economic
resources. The people claim to belong to a certain class, upper, middle and lower.
They can change their classes with the change in their economic resources.

2.Power and Authority

The economic resources provide power and authority to its holders Wealth is a
great power with authorizes one to hold control of various agencies, organizations
and resources.

3.Interdependence of Other Institutions

The economic institutions can neither survive nor develop without cooperation of
other institutions. The labor force is drawn from the families. The technical skill is
drawn from technical institutes to rum them. Sociologists are required to intervene
when the labor goes on strike and the industries are closed. Traders and
businessmen play basic role between the owners and the consumers. The political
institutions i.e., government provides rules and regulations for production,
distribution and consumption of goods and services. In this way, economic
institutions play important role in social structure.

4.Socialization

The economic institutions have their respective norms. These norms are taught to
the workers, technician and accountants. Every institution guides its workers in its
norms. Similarly, a worker of a textile mill learns how to work on a loom and a
worker of drug industry will learn how to label bottles and pack them in boxes.

5.Need Satisfaction

The major function of economic institution to fulfill human needs for which they
have developed. Agriculture provides wheat, sugarcane, cotton, oilseeds and other
raw material. Transport buses carry passengers from one place to another.
Similarly, such institutions fulfill their required needs.

6.Income Generation and Employment:

Economic institutions provide employment and income generation opportunities to

the people. Through this, people fulfill their basic needs of life. People set their
businesses under economic institutions and fulfill the needs of the society. On the
other hand, earns money and satisfy their needs too. This reciprocal systems
maintains stability and social order in society.

7.Division of Labor and Specialization

Economic institutions assign roles according to skills, capacities and abilities of the
people .In this way, different roles are assigned to the different people , and , a
complex division of labor and specialization of job developed in society .

8.Provision of funds

Economic institutions provide financial support to the other institutions like family,
politics , religion , education . Without economic institutions, these institutions
cannot perform rather collapse.

Changes in the economic institutions of Pakistan

Pakistan’s economy is moving progressively on higher inclusive and sustainable
growth path on the back of various measures and achievements during the year.
Major achievements highlighting the economic performance during FY2021 are
mentioned below:

 Pakistan was implementing stabilization policy post crisis of 2017-18 and

the economy was recovering from macroeconomic imbalances but COVID-
19 slowed down the pace which was recovered initially but the advent of
2nd and 3rd wave brought significant challenges which were met by the
timely prudent policies.
 Pandemics like COVID-19 are once-in-a-century event that devastate global
economies. Pakistan did much better in coping up with the pandemic
compared to many countries.
 Government took several important policy decisions: monetary and fiscal
measures, smart lockdowns, rapid vaccination etc. National Command and
Operating Centre (NCOC) as a single organization was made responsible to
take key decisions in collaboration with the provinces. Situation was put
under control due to government’s timely decision making, numbers of daily
COVID-19 cases are presently on declining trend.
 Prior to COVID-19, the working population was 55.74 million. This number
declined to 35.04 million which indicates people either lost their jobs or
were not able to work. Due to prudent decisions by the government, working
population reached 52.56 million till October, 2020.
 Economy has witnessed a V – shaped recovery. The current economic
recovery has been achieved without compromising internal and external
stability.
 Manufacturing has witnessed broad-based growth as major sectors of LSM
have shown significant improvement i.e., Textile, Food Beverages &
Tobacco, Non-Metallic Mineral Products and Automobile. First nine months
of FY2021 recorded highest period wise growth of 8.99 percent since
FY2007.
 Due to its impressive growth, Pakistan Stock Exchange earned the title of
being the best Asian stock market and fourth best-performing market across
the world in 2020.

Table 1: Governance Indicators’ Percentile Rank of Pakistan, 1996 & 2013

Percentile Rank* 1996 2013

Control of Corruption 8.8 17.7
Government Effectiveness 30.7 23.4
Political Stability and Absence of Violence/Terrorism 12.5 0.94
Regulatory Quality 30.9 24.8
Rule of law 28.7 20.8
Voice and Accountability 28.8 24.6

*0 corresponds to lowest rank and 100 to highest rank

Source: World Development Indicators, Online Data Bank, Retrieved; April,

2015