When we consider the synergistic effect of these

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Unformatted text preview: ets working in conjunction, we also grasp a deeper meaning of freedom from a social perspective as well. Incentives - The system encourages skill acquisition, hard work, and innovation. Freedom - The market system emphasizes personal freedom. Chapter 2 30 Learning Objective 2-4 Slide 31 Although we had a precursory view of command systems earlier in this section, we didn’t talk much about their recent demise in global popularity. It would be beneficial to take a few moments and do so at this juncture. The Demise of the Command Systems Command economic systems in the Soviet Union, eastern Europe, and China (prior to market reforms) failed. Why? The command systems in China and the former Soviet Union have taken definitive steps toward becoming market systems in the not so distant past. There are reasons for these transitions. Command systems encounter considerable problems over time. The challenges of coordination are daunting and the lack of automated incentives amplifies similar issues. • The Coordination Problem • The Incentive Problem Ch...
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