Every society must answer three questions: What should be produced? How should it be produced? Who gets it? The economy is the system of production, distribution, and consumption of goods and services. It includes markets, labor, currency, trade, and the rules that govern them.

Sociologists study how economies are embedded in social life. Markets do not exist in a vacuum. Trust, norms, and networks shape transactions. Karl Polanyi argued that the modern market economy was a historical invention, not a natural state. Emile Durkheim linked economic division of labor to social solidarity.

Types of economic systems

• Capitalism: private ownership, profit motive, market prices
• Socialism: collective or state ownership, central planning
• Mixed economies: public and private sectors together
• Informal economy: unregulated work, cash jobs
• Gift economy: exchange based on reciprocity

The informal economy employs billions worldwide. Street vendors, domestic workers, and day laborers operate outside formal accounting and often lack protections.