Managerial Economics
Article analysis on economic structures – command and market economy
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Article analysis on economic structures – command and market economy
The economic systems of the society act as its pillars for growth. Among the four primary types of economic systems, each has been found to have certain features that widely vary from that of the others – in terms of critical decision making, investment planning, permissions, and many more. One article on the command economic system and the other on the market economic system would be chosen and analyzed to understand the concepts.
Article analysis on command economy’s coercion, compliance, and collapse
The command economic system is often regarded as one of the systems of the societal economy where the economic decision-making tasks are centralized, and the government takes an active role in influencing the production aspects. In the chosen paper, the author tries to identify the prime reasons that can lead to instability in a command economic system. In addition, the study also searches for the reasons that led to the downfall of the command economy in the Soviet. He tries to verify if the inherent rest on coercion is the reason for the unstable command economy, especially due to the fact that it did not seem to be unstable before it collapsed. From the game theory perspective between the dictator and the producer, it had been observed that high-output equilibrium could be stable when the coercion level is high. However, it has also been observed during the research that the stability is largely dependent on the reputation of the dictator. Further, the research hints towards the fact that a collapse of the command economic system can be triggered by bringing in adverse trends to the costs of the dictators, thus causing reputation loss. The strike movement across the Soviets in 1989 has been identified as the consistent trigger for the collapse of the economy after a thorough analysis of all the relevant facts to the case.
Socialist market economy transition and urban processes in China – article analysis
In the chosen paper, the researcher examines the urban processes faced by China during its economic transition. The study considers the aspects of the political economy. China used to maintain its operations as per a centralized economic plan before the introduction of the economic reform. During that phase, the organization of the activities of production was done based on the central government’s sectoral departments. In addition, there was a self-contained development of labor reproduction. The state had a dominating stem in the various activities from the resource allocation role it played. The introduction of the reform in 1978 brought in market mechanisms into China’s urban processes. This led to a decentralization of the decision making processes related to land and housing reforms. However, it was fiscal, and the municipalities are responsible for the organization of the various urban developmental activities. The movement to the market economic system caused the state to lose its status of domination in terms of budgetary investments (Wu, 1995). This led to a rapid rise of the extra-budgetary, self-raised funds. While the work units are able to extract adequate value, they have become the leading housing market purchases, especially in light of the fact that the public sector workers are not able to afford to house. As the state continues to maintain its ownership in production, the chances of the market economic structure to take on the leading responsibility for China’s urban development is significantly less. The researcher concludes that for full-fledged development of the market economic system, it demands adequate freedom and decision making abilities to regulate the development programs as per the requirements. Increased freedom to decide on production-related aspects may allow the market forces to take on the leading role.
Reference
Harrison, M. (2002). Coercion, compliance, and the collapse of the Soviet command economy. The Economic History Review, 55(3), 397-433.
Wu, F. (1995). Urban processes in the face of China’s transition to a socialist market economy. Environment and Planning C: Government and Policy, 13(2), 159-177.