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“THE
POLITICAL ” COMPARING THE PERFORMANCE OF A
ECONOMY
COMMAND ECONOMY WITH THAT OF A
OF
TRANSITION MARKET MODEL.”
”
as the following: what goods and services should be produced and in what quantities;
how scarce resources such as labor and capital should be allocated to produce goods
and services; how the available supplies of goods and services should be distributed
across the population; and what price should be charged for a good or service.
Individuals, the state or both can make and implement decisions on these issues. In a
capitalist economy, most of these decisions are made by the citizens acting
direct and co-ordinate the decisions they make. As a result, a capitalist economy is
most of these decisions are made by citizens acting through the state, which co-
ordinates and implements these decisions through central planning and command. In
Nowadays, most economies are known as ‘mixed’ economies because, in reality, both
market and state play a substantial role in them. The mixed economy has become
while in the socialist countries there has been a move towards various forms of
decentralization and of a market economy. The U.S. economic system is based more
on capitalism, whereas the Chinese system is based more on socialism. Most other
countries, including Canada, rely on both market and state and so are considered to
have mixed economies. Within the mixed economies, the role of state in the former
controversy begins with the publication of E.Barone’s famous articles “The Ministry
decision-making can replace the free-market, Barone concludes that such a solution
would encounter practical difficulties because of the gigantic task of collecting data
and the continual change of technological coefficient. During the last fifty years, the
countries of Central and Eastern Europe have experienced two profound changes in
years following 1989. The socialist years had a significant impact on the socio-
Two main success indicators which can be achieved under conditions postulated in
commodity without reducing the production of another. It has been pointed out in the
last section that static efficiency can be achieved in an economic system organized
the real difference is not between a free enterprise and a socialist system but between,
on the one hand, free enterprise and a socialist market solution, and on the other
centralized physical planning. From the analytical point of view the workings of a
purely competitive and of the market solution for socialism, and the results they lead
to, are essentially the same. Nevertheless, some analytical differences have already
been noted; in addition, two more factors should be considered. With regard to static
competitive system: those existing in a static world with perfect information and
foresight, and those connected with imperfect information and uncertain expectations.
The first type contains the following factors: a)Under conditions of increasing returns
competition will break down, partly because monopolies will be formed, partly
increasing returns minimize rather than maximize profit. b)Direct interaction between
unaccounted for in market valuations, also impairs the efficiency of the system.
c)Market valuation is no better guide in the case of collective goods either. The
phenomena have dynamic implications, hence they will be dealt with in connection
a given time ; an economic system may exhibit static efficiency even if production is
uncharged from year to year. The distinction between static and dynamic efficiency
system, economic or other-that at every point of time fully utilizes its possibilities to
the best advantage may yet in the long run be latter’s failure to do so may be a
rate could be secured in a free enterprise system “if we assumed that the same
restriction of consumption, which has actually taken place [in Russia], had been
caused by taxation, the proceeds of which had been lent to competitive industry for
investment purposes.” The contrary conclusion id reached by, for example, Dodd and
Sweezy. Bergson also inclines towards the latter view: “One may imagine that in a
and smaller errors than a Competitive allocation.” Although his remarks were
that the transition from the capitalist to the socialist order will always raise problems
sui genesis whatever the conditions under which may take place. But the nature and
extent of the difficulties to be expected differ so greatly according to the stage of the
capitalist evolution at which the transition is to be made and according to the methods
which the socializing group is able and willing to use that it will convenient to
construct two different cases in order to typify two different sets of circumstances.
Bibliography:
F.A. Hayek, Collectivist Economic Planning(London, Routledge, 1935)
Joseph A.Schumpeter, Capitalism,Socialism and Democracy
Socialism,New York,McGraw-Hill, 1949
Jean-Charles-Léonard Simonde Sismondi, Political Economy