Economic / Social Goals Which economic system is best at achieving which social goals?

Review: Who answers the 3 questions? 100% Centrally-planned system 100% Market-based system What gets produced? Government (“central planners”) decides based on perceived needs and wants of their people The market decides. Producers produce goods and services based on demand of the consumers. They have a “profit motive”. 2. How does it get produced? Gov’t decides based on their social goals Producers decide, usually based on minimizing costs to maximize profits. 3. How is it distributed? Gov’t decides based on the goal of “economic equity”: everyone has the same goods and services Consumers decide. If they want something and they have the money, they buy it. 100% Centrally planned system 100% Market based system What gets produced? Government (“central planners”) decides based on perceived needs and wants of their people The market decides. Producers produce goods and services based on demand of the consumers. They have a “profit motive”. 2. How does it get produced? Gov’t decides based on their social goals Producers decide, usually based on minimizing costs to maximize profits. 3. How is it distributed? Gov’t decides based on the goal of “economic equity”: everyone has the same goods and services ??? 100% Centrally planned system 100% Market based system What gets produced? Government (“central planners”) decides based on perceived needs and wants of their people The market decides. Producers produce goods and services based on demand of the consumers. They have a “profit motive”. 2. How does it get produced? Gov’t decides based on their social goals Producers decide, usually based on ??? 3. How is it distributed? Gov’t decides based on the goal of “economic equity”: everyone has the same goods and services ??? 100% Centrally planned system 100% Market based system What gets produced? Government (“central planners”) decides based on perceived needs and wants of their people The market decides. Producers produce goods and services based on ??? 2. How does it get produced? Gov’t decides based on their social goals Producers decide, usually based on ??? 3. How is it distributed? Gov’t decides based on the goal of “economic equity”: everyone has the same goods and services ???

No! Every country is a mix of the two approaches! More Review: Is there any country that is 100% Command or 100% Free Market? No! Every country is a mix of the two approaches!

Centrally-planned system More gov’t control over the economy Draw this on your notes page! Market-based system Less gov’t control over the economy North Korea Cuba China France USA Singapore

Consider: How does a country’s economic system develop? Based on the economic, social, and political goals of the leaders of the country. Also, rooted in the country’s history and, therefore, values.

Economic / Social Goals Economic Efficiency Maximize resources, profits. Make the most with the least waste. Get people what they want and need. Economic Freedom Let people make their own economic choices: what job to have, what to make, what business to start, what people to hire Economic Security / Stability Prevent ups and downs of the economy, create or keep jobs, keep prices stable

Economic / Social Goals Economic Equity / Fairness Let people have equal amounts of wealth, goods/services; limiting income inequality Economic Growth and Innovation New ideas and products, making more products, hiring more people

Centrally-planned system More gov’t control over the economy Again, draw this on your notes page! Market-based system Less gov’t control over the economy North Korea Cuba China France USA Singapore This side emphasizes: Economic stability, security Economic equity This side has problems with: Economic efficiency Economic growth and innovation Economic freedom This side emphasizes: Economic efficiency Economic growth and innovation Economic freedom This side has problems with: Economic stability, security Economic equity

Consider: What “goals” might the below economy value?

So Which System Is Best? Recent history suggests that a more market driven economies have better outcomes for their citizens. Market economies offer freedom of choice, efficiency, and the quest for improvement of goods and services by firms.

Trade Offs? But, there are trade offs! In Command and Traditional economies, citizens are more secure, and there is greater equality for its citizens (and lack of choices). In Command economies, services are often provided as a basic right, not to be determined by price (paid for by high taxes).

Socialism A type of mixed economic system. A system of social origanization in which private property and the distribution of income are subject to social control (**mostly by the government**). Usually a much freer political system than communism.