TYPES OF ECONOMIES

WHO AND WHY?  Who makes economic decisions?  Who owns resources?  Who provides goods and services?  Why?

Either... or... FREE MARKET ECONOMY COMMAND ECONOMY (PLANNED ECONOMY) WHO makes economic decisions? WHY?

Either... or... FREE MARKET ECONOMY COMMAND ECONOMY (PLANNED ECONOMY) WHO makes economic decisions The market: -supply and demand -sellers-buyers -producers – consumers The state WHY? -to allow competition and thus make the economy more efficient ↓ -a wider choice of products, better quality, lower costs -to redistribute wealth in the country more fairly -to care for public needs

Group the following expressions:  government interference  privately-owned companies  market mechanism  market reliance  state-owned companies  central planners  laissez-faire  government-run business  central planning system  privately-run companies  government intervention  USSR

PLANNED E.vs. MARKET E.  government interference  state-owned companies  central planning  government intervention  USSR  market mechanism  market reliance  privately-owned companies  privately-run companies  laissez-faire

... or both... FREE MARKET ECONOMY (FREE ENTERPRISE ECONOMY) COMMAND ECONOMY (PLANNED ECONOMY) MIXED ECONOMY WHO? makes economic decisions The market: -supply and demand -sellers-buyers -producers – consumers The stateBoth the market and the state WHY? -to allow competition and make the economy more efficient -to provide better quality products at lower costs -to redistribute wealth in the country more fairly -to care for public needs To benefit from both economic systems

Identify the advantages and disadvantages of the market economy as opposed to the command economy (RB: p.17). FREE MARKET ECONOMY COMMAND ECONOMY (PLANNED ECONOMY) advantages disadvantages

“The market has a keen ear for private wants, and a deaf ear for public needs.” (R. Heilbroner)

MIXED ECONOMY PUBLIC SECTOR VS. PRIVATE SECTOR Who provides goods and services? Why? (What is their interest?) What do the two sectors consist of?

WHO and WHY? PUBLIC SECTORVS.PRIVATE SECTOR  The government, local authorities (e.g. counties, cities, municipalities)  Care for socially important issues of public interest, e.g. protecting environment, consumers, education,...  Less profitable and unprofitable businesses  Private owners  Making a profit  Profitable businesses

WHAT DOES IT CONSIST OF? PUBLIC SECTOR VS.PRIVATE SECTOR  public services: e.g. education, defence, social welfare, public safety, utilities  Government-owned industries: e.g. public corporations* such as some utilities  Municipal enterprises: local government, e.g. bus company  Privately-owned companies

The division is not always so clear... PRIVATE S. → PUBLIC S. → PRIVATE S. → ?... nationalisation denationalisation privatisation... and there may be cases of cooperation.... PPP

nationalisation vs. privatisation Are the following arguments in favour of nationalisation or privatisation? 1.The sale of an industry raises money for the government. 2.Competition makes an industry more efficient. 3.It is socially right. 4.These companies are more likely to innovate and develop desirable products than these owned by …. 5.The government has a better control of the economy. 6.Consumers are offered more choice and better quality. 7.An industry is more efficiently managed by that sector.

What is privatization, anyway? (Read the text, find answers - RB:p.27)  in the broadest sense  contractor  seek  though  leap  state enterprise  issue vouchers  general public  auctions  public stock offering  contradictory goals  raise money  attract  layoffs  proponents  argue

The Pendulum of Control (RB, p.29) More or less government interference? Chronology?  communist revolutions  The Wealth of Nations  Republican victory  ‘the invisible hand’  FDR  The General Theory of Employment, Interest and Money  Mid-1980s and 1990s (CEE)  The New Deal  passive role “in the business of business”