An economic system is any system of production, exchange, allocation, and distribution of goods and services in society. Ultimately, it is a social system, involving not just institutions, but people as well. Underlying all economic systems is the concept of scarcity. There is only a limited amount of resources, and so individuals (or institutions) must make choices.
Traditional economic systems are those in which production and distribution of goods and services follow established patterns dictated by tradition. Under such economic systems, little changes from one generation to another. A classic example of a traditional economic system is medieval Europe. Command economic systems, also known as a planned economy, have the state in total control of the use and distribution of resources. Government will regulate both prices and wages. The classic, but failed, example of a command economy was the USSR.
In market economies, all economic decisions are made at the individual level. These economic systems are characterized by a total lack of government interference, often known as a pure market economy. The Gilded Age in the late 19th century was the closest society came to such a system, and many conservative thinkers actively promote such unfettered economic systems. However, the modern United States is an example of a mixed economic system, with most decisions made in the marketplace, but the government retaining some control over allocation and distribution of resources.