What Are the Differences Between Classes in an Economic System?

The economic classification, also called the economic class, is an important concept in economics. It divides things into economic categories based on how they are produced. In broad terms, it can be said that the producers of a commodity are classified as economic classes A-D. By classifying the producers economically, we can better understand where the market lies. Broadly, all goods produced by human labour are classified as goods in economic categories E, F, G and H. The producers of each of these economic classes have their own unique characteristics; this is what we can then classify them as such. Let’s take a look at each of the three general economic categories and their characteristics.

Economic classifies people according to how they produce their goods. It therefore classifies production relations according to how they are managed and controlled by the producers. A producer who produces goods according to a properly regulated production process will be classified as an economic class Cader. His products will be sold in the market for a fixed price. As the prices are regulated, the profits are assured by the supply and demand forces prevailing in the market.

A producer who performs a complex process of production without any economic classification will be considered as a producer of goods in economic class D. His goods will not be sold in the market as his profits depend on how efficiently he runs his production process. For him, the efficient operation of the process means the ability to sell the finished goods at a competitive price. A producer in the economy of G who makes goods by combining the techniques of different producers will be classified as a producer of goods in G -H. His products will be sold in the market for a pre-determined market price.

Now let us look at the other two economic categories. The producers of goods in the category F are mostly large corporations. The profits of the large corporations come from the sale of their products to the market. The large companies control the distribution of their goods and keep a strong grip on the market. A producer of goods in the economic category G will be small-scale, i.e., he will sell his goods to the market at a profit.

Both G and H can be isolated; they are the two extremes of the economic hierarchy. The economic goods sold by the large corporations are usually distributed through economic categories I and II. The distribution of the large-scale goods is usually done through distribution networks. The distribution networks of the economic category I include government intermediaries, trade unions, and labor unions. Distribution networks of the economic category II include private or self-owned distribution networks. Private owners may belong to the economic classes C, D, and F.

There is another division of distributional groups. In an economic system based on money, there are two groups, those based on value and those based on need. Goods sold on value would include items that are not essential to life. The economic category based on need is called economic necessity.

In an economy based on money, economic category III consists of goods that are produced with an extra cost, that is, increased value. On the other hand, in an economy based on currency, goods are sold according to the monetary value. The economic category IV consists of goods that are produced without an extra cost. This category includes luxury goods, consumer durables, and personal property.

Distribution is not based on need but on the ability to produce. Therefore, some goods cannot be produced unless others are. Some goods are produced in bulk, while some require small-scale production. Large-scale production is classified as economic category V. Labor, land, and capital constitute the economic category VI. Profits and losses constitute the economic category VII, and surplus income and taxes constitute the economic category VIII.