What is meant by Economic Institution and also Describe the functions of an Economic Institution

Economic Institutions

Economic institutions came into existence as a result of evolution of society. There are no concepts in the primary hunting and gathering society because food was in abundance without any monopoly of anyone. Individuals moved continuously in research of food and better conditions and this nomadic life did not allow any restriction but when society changed into agrarian society, a surplus product came into existence which was started to exchange with services and other things and caused. the beginning of economic activities. In the division of labour, specialized tasks and elements prevailed like fishing, blacksmith, carpentry and weaving etc. professions started .but with the beginning of industrial society, the economic institution gained momentum, the center of social activities became the economic activities and division of work system started on the basic of skills and mutual give and take got rapidness. Instead of things, coins started to be used and prices were fixed and everything was to be considered in terms of currency coins.

Definitions of Economic Institution

1. Ian Robertson :
Economic institution is the institutionalized system for producing and distributing goods and services."

2. RT. Schaefer :
The social institution through which goods and services are purchased, distributed and consumed."

Economic Activities

1. Primary Sector :
This is that part of economy in which economic activities consist of producing raw materials or collecting those. Just like, fishing, hunting, gardening and agriculture.

2. Secondary Sector :
This is that part of economy where through economic activities the raw materials produced by primary sector are made better and are value-added like to make furniture from wood, to manufacture cars from iron, to prepare cloth from cotton and to prepare food products from wheat and rice.

3. Tertiary Sector :
This is that part of economy where economic activities consist of services like treatment, care, education, communication, engineering and transport, etc.

4. Distribution of Labour :
Division of labour, the specialization by individuals or groups in particular economic activities.

Economic Evolution and Division of Labour

Economic evolution can be divided into three stages with reference to division of  labour. Its detail is given below:

1. Pre-Industrial Societies :
These societies belonged to primary sector of economy, including fishing, shepherding, mining and agriculture. Family is a unit of production and consumption. Distribution is simple and on the basis of sex. Males do fishing, shepherding and working in fields and females do domestic jobs like care of children and protection.

2. Industrial Societies :
The majority of the population is busy in professional activities, including production and distribution of articles i. e., workshop, factory markets and banks. The base is education and professional skill in the evolution of this economic system like profession, doctor, carpenters, medicine and factory skilled trades etc.

3. Post Industrial Societies :
In these societies, the majority of the population is busy in providing services activities. A small part of population is busy in production activities (agriculture and industry). In this type of society, the' distribution is on the basis of specialization. For example, for treatment of eye diseases, eye specialist and similarly heart specialist, computer experts, manufacture, engineer, communication producers, editors, actors and reporters etc.

Functions of Economic Institution

Economic institution does the following functions for the betterment and welfare of individual of a society:

1. Regulation of Economic Activities :
The economic activities in traditional agrarian societies were simple and generally of permanent nature. In the industrial societies, these activities are of different nature and are variable and to create an organization for them is necessary because disorganization of there may lead to socialist dispersion. To determine prices, to stabilize these, to keep an eye on demand and supply and to ensure their supply are sense of the duties of the economic problems.

2. Training for Economic Activities :
Training is the most of economic activities in the modern industrial societies, to do these activities in. a suitable manner and an economic institution provides this, tracing With reference to its different departments, including industrial administration, business, banking and stock exchange, individual's rules and regulation and marketing etc. The welfare in the modern age depends upon the organized economic activities for which skilled persons play an important role. This skilled labour force is prepared by economic institution.

3. Formulation of Regulation of‘Economic Exchanges :
Business dealing is a touching matter therefore, there is a need of rules and regulation in this industrial and business era. Political institution has its supervision on these matters and rules and regulations are fixed after considering the needs of economic institution and timely changes are made in these to avoid any complication and irregularity to keep the activities continue effectively. These rules include property exchange, custom laws, expert important rules and registration of companies etc.

4. Monitoring of Economic Activities :
Economic institution supervises all economic activities. These activities are recording and data is collected and in the light of this data, a future policy to make them more effective is prepared. The supervision problem has become important in the competition environment and to keep control on our demand and supply and to keep a balance is necessary because unbalance of this may upset the economic system.
It ensures the division of wealth and precious sources to avoid accumulation of wealth and its negative effects on the society i.e. to keep the society free from class struggle and tension leading to conflict and dispersing the harmony of social system.

5. Maintaining Demand and. Supply : 
This balance of demand and supply controls the economic activities. Rise and fall of prices, the situation of stock exchange, production of industrial articles, payment of services determination and chances of employment and inflation depend upon demand and supply. The ability to keep this balance determines the
strength of economic institution. The development plans for progress depend upon this. Prices remain controlled and increase the stability of the society and the society is saved from some unpleasant situation.