By Grace Yun ECON SYSTEM REPORT

COMMAND ECONOMY - VIETNAM State determines resource allocation Doesn’t always make the right choice – poor management Economy experienced rapid growth Slowed down – recently at 4% growth Inefficient state enterprises Approaching bankruptcy High inflation rate – 12%

MIXED ECONOMY (EUROPEAN SOCIALISM) - FINLAND Unemployment has been decreasing Small GDP deficit Approximately 1% There are private enterprises Example: Nokia Loss of competition Led to increase in costs and decrease in exports

MARKET ECONOMY - AUSTRALIA Improving GDP growth rate 4.3% higher in 2012 than 2011 Effective coordination within economy “Strongest economy in the developed world” Low unemployment rate 5.2%

COMPARISON – COMMAND & MIXED Similarities The government is involved in resource allocation Both economies have government-owned enterprises Differences In command economies the government has more influence over the market than in mixed economies There is more incentive to be efficient in mixed economies than in command economies (mixed economies have less moral hazard In mixed economies there are private enterprises

COMPARISON – COMMAND & MARKET Similarities Both systems can lead to economic growth Both systems can have limited competition (although for different reasons) Both systems can result in low unemployment rates Differences Command economies don’t provide incentives, market economies do In command economies the government determines competition, whereas in market economies supply and demand determine competition Command economies value equality over efficiency, and vice versa for market economies

COMPARISON – MARKET & MIXED Similarities Both systems can have decreasing/low umemployment rates Both systems have face loss of competition Differences Market economies have less government intervention than mixed economies do In a market economy, supply and demand determine resources allocation, whereas in a mixed economy there are other main factors

OVERALL COMPARISON SIMILARITIES: all three economies have producers, suppliers, goods, services, price, and income. They can also all have low unemployment rates and face limited competition. DIFFERENCES: the level of government intervention in the market is the factor that changes in the three economies – this influences incentives to be efficient. The less moral hazards there are, the more efficient companies try to be.

COMMAND ECONOMY - VIETNAM Theory: Everything is owned by the government FALSE: There are private enterprises Theory: Due to moral hazards, state-owned companies are not as efficient as they could be TRUE: Vietnam’s state-owned companies are inefficient (use 40% of capital, but contribute to 25% of the GDP)

CONTINUED - VIETNAM ABILITY TO ALLOCATE RESOURCES EFFECTIVELY: In theory, Vietnam values equality over efficiency – meaning that in command economies the the allocation of resources is not very effective ; This is apparent in the 12% inflation rate and also by the fact that numerous companies are close to being insolvent

MIXED ECONOMY (EUROPEAN SOCIALISM) - FINLAND Theory: Less government intervention than in command economies TRUE: There are private enterprises, and one (Nokia) in particular had and still has a big impact on Finland’s GDP Theory: In public sectors there is little incentive to work hard, so people don’t work hard FALSE: Finland’s public schools teachers provide one of the most effective educations offered – Finland’s students are among the best in the world at reading, math, and science

CONTINUED - FINLAND ABILITY TO ALLOCATE RESOURCES EFFECTIVELY: In theory, there should be a balance between equality and efficiency in mixed economies – as Finland is more command-leaning, equality would be prioritized; Resource allocation is very effective – i.e. schools are able to provide free meals, health care, and counseling to their students

MARKET ECONOMY - AUSTRALIA Theory: Will face problems with umemployment and inflation rates FALSE: Australia has low unemployment rates, and her inflation rate is not high Theory: Because the demand and supply determine resource allocation, efficiency will be achieved TRUE: Australia has seen good efficiency, as evident in their stable economic growth and good business investments

CONTINUED - AUSTRALIA ABILITY TO ALLOCATE RESOURCES EFFECTIVELY: In theory, because individuals are able to act according to their self-interest, resources should be allocated effectively, with each person trading something to get what he/she wants; This is manifest in the way that the government has been able to increase spendings in a variety of areas such as food, health, education, and transportation. It is also shown in the salary increases that many companies granted to their workers

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