1. Aim: How is a centrally planned economy organized?
DO NOW:
When someone tells you to do something you don’t want to do, what are the results?
Why do you think Communism failed in Russia?

2. Adam Smith and Capitalism
Wrote book called The Wealth of Nations
Progress results when individuals follow their own self interest
Laissez-Faire: government should not interfere in the economy

3. Government answers the three key economic questions
What?
How much?
To whom?
Who is producing?

4. Think
Can you foresee any problems with the government answering the three economic questions?

5. Theories of centrally planned economy
Socialism
theory that everything should be distributed evenly throughout society (can still allow democracy)
Bernie Sanders
Democratic Socialist

6. Theories of centrally planned economy
Communism
a centrally planned economy with all political & economic power resting in the hands of a central government (totally authoritarian)

7. Theories of centrally planned economy
Authoritarian
government requiring strict obedience to an authority, such as a dictator.

9. Soviet Union– communist society until 1989
Collectives
Large farms that required peasants to produced.
Food lines, shortages and people starving

10. Explain
Capitalism and communism stand at opposite poles. Their essential difference is this: The communist, seeing the rich man and his fine home, says: 'No man should have so much.' The capitalist, seeing the same thing, says: 'All men should have so much.'”
“Communism is like Prohibition, it's a good idea but it won't work”

11. Problems with central economies
Cannot meet the needs or wants of consumers.
Workers lack any incentive to work hard.
No reward for innovation.
Personal freedoms are given up for society.

12. Market Economy Advantages Disadvantages
Allows for creative production to meet consumer demand
Government regulation protect the consumer
Competitive production affects prices
Collective Bargaining procedures allow workers to have a in their working conditions
There may be shared ownership
Disadvantages
Possible periods of unemployment
Private industry can withhold the supply of goods to bring about a higher price

13. Command Economy Advantages Disadvantages
Full employment
Production goals can be set and all the nation’s energies may be directed to reach these goals
No disruption of production due to labor disputes
Efficient placement and us of workers
Major industries such as transportation, communication, and utilities are under government control therefore allowing them to be available on a relatively timely basis
Disadvantages
Production does not respond to the consumer
Workers have little say in their working
Very little mobility either choosing or changing jobs
Goods continue to be produced even if they are defective or not in demand
Inefficient use of workers