Economic Systems Ohio Wesleyan University Goran Skosples 18. Performance of Planned Socialist Economies

1 Performance of Planned Socialism Lecture 20  Hypotheses:  Economic growth state controls ___________ and ____________ efficiency issues  Efficiency no ___________ valuation  allocative efficiency? focus on consistency (feasibility)  Income distribution _______________ capital and land considerable attention to “fair” income by authorities  (macroeconomic) Stability investment spending controlled by the state control of supply and demand of consumer goods no job layoffs in ________________

2 Economic Growth

3  _____________ in socialist economies although the authorities placed emphasis on it  since mid-1970s, _________ in economic growth, while capitalist economies ______  fear that the system lost its ability to generate growth (______)  much more ________ than ___________ growth productivity growth __________ under socialism sacrifice now for the future gains, but those gains never materialized

4 Efficiency (1975)

5 Efficiency  Do socialist countries systematically obtain less output from their available inputs?  compare Italy and the Soviet Union  there was a systematic tendency for the output per worker to _________ of output per worker in capitalist countries when inputs are held constant  overall, efficiency in planned socialist countries was _______ than in market capitalist countries

6 Income Distribution  What are the sources of income inequality in market capitalist economies? unequal distribution of ___________________ - unequal distribution of __________________  Socialist countries had a more equal distribution of ____________________ provision of _____________________  The role/effect of the redistributive government in capitalist economies?  Overall, ______ differences in income distribution between capitalist and planned socialist countries

7 Income Inequality

8 Economic Stability  _____________ in fluctuations in GDP, industrial output, and investment between two systems  unemployment smaller in planned socialism  official prices more stable in planned socialism new products prices in the ____________________ cost of ________________ or paying ________  Q d > Q s  rationing via long lines, coupons,...

9 Economic Stability

10 Decline of Planned Socialism  What caused planned socialist systems to collapse? slowdown in productivity - declining ________________________  diminishing returns to capital (capital substituted for labor) - labor less ________ – no improvement in the standard of living, shortages of goods  __________________ ________ inefficiencies inability of the center to control the periphery complexity of planning increases with growth and new products (more variety) incentives – both for workers and managers  Inability to ___________ the system