Economic Systemsand Economic Success MeasurementVS.
Economy Regulation ContinuumPure Free Marketnothing regulated – produce and sell what you want, how you want, and bare all the riskMixed Model Regulation of some industries (e.g., military regulated, banking free)Regulation of some aspects of operation of all companies (e.g., accounting regulated, production free)Pure Planned EconomyMandated plan for what and how to produce and sell, risks covered by the government (usually only semi-successfully)Where on the continuum is the US?ABCD E
Which system is better?In which country and under what system would you prefer to live?A.Pure capitalism (unregulated markets, very small B.Mixed (some areas regulated, some not, powerful C.Socialism (fair degree of regulations, many services government, no service free or subsidized, very low taxes, equal taxes for rich vs. poor)but not all-powerful government, some services free or subsidized, a bit higher taxes for rich)free or subsidized, higher taxes, high taxes for rich, no taxes for poor)
Which company would you prefer to work for as accountant?
•Most people on Earth(both in the West and in the East) have a very strong bias and cannot clearly think about pros and cons of different political and economic systems•Most Russians and Chinese (about 2B people) sincerely believe that “controlled democracy” and possibly even a command economy are the most effective systems•Most Europeans (about 1B people) sincerely believe that mixed socialist economic system are most effective•Most North Americans (350M people) sincerely believe that Democracy and Free Market Economy are most effective systems •While we may not know who is right, we know for sure that two of these three groups are wrong as these options are mutually exclusiveWhat is more likely: Important Remarks1B+ people are stupid and we are smartEach system has its pros and cons and centuries of brainwashing by our governments prevent us from seeing that something we don’t have may also work well?
Economy Regulation ContinuumThe truth is, nowadays all world’s economies are mixed. But the extent differs. Note, contrary to common perception, Canada is not socialist (compared to the rest of the world), but extremely capitalist
1. The following is true:system continuum Canada is almost at the Free Economy extreme, second only to the US. None of the above are true
Centrally Planned EconomyGovernment owns most land, factories, and other economic resources and plans nearly all economic activityExamples? AsiaCentral EuropeEastern EuropeLatin AmericaRussia (1917)China (1949)Cuba (1959)Welfare of the groupis paramountEconomic and socialequality is the goal
Planned Economy: Opponents’ ArgumentsNo incentive for effort and initiative -> reduced productivity•fixed pay•Entrepreneurship unnecessary no profits•The only way to earn more •
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