Question

Explain the difference between the use of tradition, authority, and a market system as allocators of scarce resources

Answer 1

Traditional authority (also known as traditional domination) is a form of leadershipin which the authority of an organization or a ruling regime is largely tied to tradition or custom. The main reason for the given state of affairs is that it 'has always been that way'.

Traditional authority is one of the three forms of authority identified by sociologist Max Weber’s tripartite classification of authority, alongside charismatic authority and rational-legal authority.

The authority in traditional authority is derived from custom, tradition or established norms and is derived, says Weber, from the concept of patriarchal mastery in the family unit. Other family members respect the rule of inheritance and obey the patriarch, although he has no real means of enforcing obedience.

The divine right of kings is another form of traditional authority whereby the authority of a monarch is seen as pre-ordained by God and impossible to deny or challenge. Feudalism is another form of traditional authority, based quasi-military concepts of allegiance. Patrimonial government also relies on traditional authority – this is an expansion of the leader’s household to such an extent that it gives rise to ‘departments’ which handle the roles of government.

In a free market economy, resources are allocated through the interaction of free and self-directed market forces. This means that what to produce is determined consumers, how to produce is determined by producers, and who gets the products depends upon the purchasing power of consumers.The distribution of goods and servicesdepends on the distribution of money income. ... In a traditional economy, goods and resources are allocatedaccording to historical patterns. However, in a market economy, goodsand resources are allocated according to the decisions of individual producers and consumers.Resource Allocation: traditional, command, and market economy. The term “resource allocation” refers to the amount of input a person can put forth to produce products and goods with the resources given to them. ... In a command economy resources areallocated by the government who designates a set price for products.