The establishments of trade blocs like the NAFTA also brought countries together to boost their economies and increase communication. Thus, the creation of new economic entities and organizations reduced the significance of existing traditional systems and gave way to new systems. .
Therefore, it is clear that the last few decades have been marked by radical social and political reforms hence making it imperative to adopt a new method for studying economic systems. It is almost futile to label economies as socialist, capitalist and communist when it is clear that these systems can be abandoned very easily as shown by the Eastern European countries. Therefore, rather than limiting ourselves to these three narrow systems, we can look at all aspects contributing to an economy to get a better understanding with the modern approach. .
While the three traditional systems tend to define economic systems in terms of ownership and means of production the modern approach takes into account the distinct characteristics of the respective economy. The traditional terms for economic systems are limited to fixed systems and are not applicable to dynamic changes taking place in economies across the world. For example, it would be incorrect to label the Chinese economy as entirely communist because it is clear that it is opening up to the West. .
Hence the modern approach defines economic systems in terms of organizational features, which basically refers to the system of communication within groups. It also examines incentives, mechanisms for providing information as well as the amount of control and income participants of a system have. This approach also takes into consideration transformation and change in the political and social hemispheres. The main difference between the traditional and modern approaches is that the latter is able to incorporate and evaluate the impacts of constant changes to the economy while the former presents a constant perspective.