Centrally Planned Economy
Why is the centrally planned economy generally discarded/
People see better alternatives though economic progress and higher standard of living and higher GDP for other systems
S Korea and N Korea example
a failing Centrally planned economy vs a flourishing market economy with the same demography of people and resource endowment
What did Marx say about Capitalism
that capitalism is more productive but it comes at the expense of exploiting the worker
What is the labor theory of value?
All outputs belongs to the labor group
According to Marx, what must Capitalists do to maximize profits?
Exploit the laborer
Who is embowered and who diempowered in a centrally commanded economy?
the individual is disempowered and the state is empowered
What happens to the market in a centrally planned economy?
The market is killed
Is there consumer sovereignty in a centrally commanded economy?
No, there is no consumer sovereignty
What happened to Lennon at the end of his life?
He had second thoughts about the economy he had created
What did the Russians do to force their economy to be successful?
They took the land wealth from the peasants
What was the treatment of individuals like in Russia?
poor treatment of individuals
material balance plan
where you get your supplies
What are the problems with the centrally planned economy?
it locks you into the past of what worked and what did not look and does not allow you to look towards the future
What happens to resource allocation in a centrally commanded economy?
They are mis allocated
Where do business profits going in a centrally commanded economy?
To the failing firms
What happens to international trade in a centrally commanded economy?
they block off trade lowering GDP
What is the Ratchet Effect?
What you do now is what you will always do down the road; leads to a lack of innovation and creativity
What was the system of economic organization instituted by the Bolshevik administration?
What was the scissors crisis?
the Russian agricultural goods fell sharply and the manufactured goods rose
What was the plan that Stalin implemented into the control economy?
the five year plan
Law of State enterprises
tried to make firms more accountable for their actions
The USSR state planning commission
The USSR state bank
the preliminary estimates of both planned inputs and outputs
negative value added enterprises
firms for which outputs < inputs put into them
peasants doing farming that the state takes all the profits away from