View
215
Download
0
Category
Tags:
Preview:
Citation preview
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1
The Economic Demise of the Soviet Union
Lesson 1: Opportunity CostLesson 2: Missing Markets and Missing Prices Lesson 3: Incentives MatterLesson 4: Private Property RightsLesson 5: Transaction Costs - Life in a Soviet HouseholdLesson 6: Applying the Lessons of the Soviet UnionConclusion
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Get Up Now Don’t Get Up Now
Decision-Maker: YOU
The Economic Demise of the Soviet Union
Considered
Alternatives
Economics Online for Teachers, Part 1
Get Up Now Don’t Get Up Now
Decision-Maker: YOU
The Economic Demise of the Soviet Union
Considered
Alternatives
Perceived Benefits
Economics Online for Teachers, Part 1
Get Up Now Don’t Get Up Now
Decision-Maker: YOU
Don’t rush
Walk the dog
Coffee
1st in shower
Read newspaper
The Economic Demise of the Soviet Union
Considered
Alternatives
Perceived Benefits
Economics Online for Teachers, Part 1
Get Up Now Don’t Get Up Now
Don’t rush
Walk the dog
Coffee
1st in shower
Read newspaper
Sleeeeeepp!
Stay warm
Opportunity Cost
Choice
The Economic Demise of the Soviet Union
Considered
Alternatives
Perceived Benefits
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Considered
Alternatives
Perceived Benefits
Choice
Benefits Refused
Get Up Now Don’t Get Up Now
Don’t rush
Walk the dog
Coffee
1st in shower
Read newspaper
Sleeeeeepp!
Stay warm
Opportunity Cost
Sleeeepp!
Stay warm
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Considered
Alternatives
Perceived Benefits
Choice
Benefits Refused
Get Up Now Don’t Get Up Now
Don’t rush
Walk the dog
Coffee
1st in shower
Read newspaper
Sleeeeeepp!
Stay warm
Opportunity Cost
Walk the dog, Shower,
Coffee, Don’t rush,
Read newspaper
Decision-Maker: YOU
Economics Online for Teachers, Part 1
What About . . . ?
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Opportunity cost – the benefits of the foregone (next best) alternative
A Journey of Choices
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Opportunity cost – the benefits of the foregone (next best) alternative
A Journey of Choices
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
5-Year Plan (Emphasize Investment)
No 5-Year Plan (Emphasize
Consumption)
Decision-Maker: Stalin
The Economic Demise of the Soviet Union
Considered
Alternatives
Perceived Benefits
Choice
Opp. Cost
Benefits Refused
Economics Online for Teachers, Part 1
Considered
Alternatives
Perceived Benefits
•Increased military strength•Improved infrastructure•Industrialize – increase production•Promise of future consumer goods
Choice
Opp. Cost
Benefits Refused
5-Year Plan (Emphasize Investment)
No 5-Year Plan (Emphasize
Consumption)
Decision-Maker: Stalin
•Fewer resources diverted from agriculture•More “consumer” goods
•Fewer resources diverted from agriculture•More “consumer” goods
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Change Perception of Benefit
propaganda trains
Economics Online for Teachers, Part 1
gulag (forced labor camp)
arrest of kulak (landholder)
genocide in
Ukrainetoll:5-12
million
The Economic Demise of the Soviet Union
Change Perception of Cost of Opposition
Economics Online for Teachers, Part 1
Sign Pact with Nazis
Don’t Sign (Try to work with Allies)
Decision-Maker: Stalin
The Economic Demise of the Soviet Union
Considered
Alternatives
Perceived Benefits
Choice
Opp. Cost
Benefits Refused
Economics Online for Teachers, Part 1
Opportunity Cost Analysis
Considered
Alternatives:
Sign Non-Aggression Pact with Nazis
Continue Discussions with
Allies
Perceived
benefits:
Choice
Opp. Cost
Decision Maker:
timeterritorytechnology
snub Nazistrade w/ West
Signing Molotov – Ribbentrop Pact
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Nazis Invaded USSR, June 1941 . . .
and . .
.The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1
. . . lost the war
German POWs in Moscow
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Other Examples: Cuban Missile Crisis
The Economic Demise of the Soviet Union
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Allocate resources to production: goal is to provide the goods and services citizens want and need
Decide how many pencils and how much candy to produce
Assign prices to pencils and candy
The Economic Demise of the Soviet Union
Task of the Production Ministers
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
25 0 0 50
24 2 1 48
23 4 2 46
22 6 3 44
21 8 4 42
20 10 5 40
19 12 6 38
18 14 7 36
17 16 8 34
16 18 9 32
15 20 10 30
14 22 11 28
13 24 12 26
Economics Online for Teachers, Part 1
It’s Really Hard to Get It Right!
Leonid Vitaliyevich KantorovichNobel Prize in Economics, 1975
Leonid Vitaliyevich Kantorovich Boy
Genius
The Economic Demise of the Soviet Union
The Economic Demise of the Soviet Union
optimization (plywood)
linear programming
(1930s)shadow pricing
Economics Online for Teachers, Part 1
Soviet State Stores – Administered Prices
very little choice of style, quality, or sometimes, even size“Universam” –
state supermarket
lines common: part of “price” is time in line
The Economic Demise of the Soviet Union
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Opportunity Cost Analysis
Considered
Alternatives:
Centralized allocation of resources
Decentralized (market) allocation of
resources
Benefits:
Choice
Opp. Cost
Decision Makers:
•rapid industrialization•capital investment•military strength
•prices allocate resources to their most highly-valued uses•Information transmission and processing is low-cost and spontaneous
The Economic Demise of the Soviet Union
Conne
ct Back
to earlier
lesson
Economics Online for Teachers, Part 1
Centrally directed production– consumer goods low priority
State stores:
Unpredictable
availability
Unchanging prices
Because little
available, most
everything
purchased
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
1st-come-1st –served rationing: life lived in line
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Who is the decision-maker?
What incentives does the decision-maker face?
The Economic Demise of the Soviet Union
Why Would Anyone DO That?
Economics Online for Teachers, Part 1
Part of a report from the British Ambassador in Moscow, comparing 1936 USSR production targets with those from 1935(Catalogue ref: FO 371/20344, January 1936)
4. The following increases in crops are anticipated (figures are in most cases derived from percentages and are therefore only approximate):
5. In 1935 live-stock is stated to have increased as follows: horses, by 5 per cent; cattle, by 18 per cent; pigs, by 38 per cent; sheep and goats,
8. Production in 1936 is to be raised to 135 million tons (approximately 108 million tons in 1935) of which 80 million tons will be provided by the Donetz coal-field, and 17.8 million tons by Kuznetsk. Mechanisation will be increased to 80.7 per cent for cutting and 87.7 per cent for hauling
11. The output of the machine-building industry, which is developing rapidly, is to be increased by a further 24 per cent. Imports have now dropped to a very small sum – 62 million roubles in 1935 as compared with an average of 500 million roubles per annum during the First Five-Year Plan (1929-3
12. 161,500 automobiles are to be produced In 1936, as compared with 96,700 in 1935, but the growth in numbers will be confined to motor trucks, as the car plants at Moscow and Gorki are being converted for the manufacture of new types of machines. By the end of 1936 it is estimated that the country will have 314,000 trucks and 86,000 cars
Production Incentive: Output targets
1935 1936
Grain 90.0 MT 102.9 Million Tons
Sugar beet 15.7 MT 25.4 MT
cotton 1700 TT 1900 Thousand Tons
http://www.nationalarchives.gov.uk/education/heroesvillains/transcript/g4cs2s1t.htmThe Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Incentive:Gold Star Hammer and Sickle Hero
of Socialist Labor
Alexey Stakhanov : miner & Hero of Socialist Labor He became a celebrity in 1935 as part of a movement that was intended to increase worker productivity and demonstrate the superiority of the socialist economic system.
He mined a record 102 tons of coal in 5 hours and 45 minutes (14 times his quota).
http://www.acepilots.com/medals/soviet/highest.html
For outstanding achievements in socialist
labour that improved production and the might and prestige of the USSR
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
The Economic Demise of the Soviet Union
Well, Comrade, I see that the new quota is in tons.
Economics Online for Teachers, Part 1
Perverse incentives: output targets
The Economic Demise of the Soviet Union
“Suppose you were in charge of nail production and your quota was set in tons of nails. What would be the easiest way to beat your quota? By weight, spikes are easier to produce than small nails. If your quota were in units of nails, you might produce lots of tacks. Length? Long skinny nails.
. . . The result is that consumers' needs have been poorly met. Gold-filigreed sewing machines that did not work resulted when quotas were set by value.
Similarly, quotas for square feet of housing generate warped floors and cracked walls, and required units of clothing invite sloppy sewing on shoddy material.”
http://www.unc.edu/depts/econ/byrns_web/Economicae/sovietecontransition.html
Economics Online for Teachers, Part 1
“what’s not measured is sacrificed”
Weight # units
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Invention? – YesInnovation? – Not so Much
Economics Online for Teachers, Part 1
BZ1-C Redline C-Core Baseball Bats The world's best baseball bat: patented Carbon Core technology combines Easton's exclusive Sc500 Scandium alloy walls, the strongest in the game, with carbon graphite reinforcement, resulting in the thinnest walls ever without sacrificing durability. Extended barrel for maximum hitting area. Alloy: Sc500/graphite
Economics Online for Teachers, Part 1
no bridge from invention to innovation
Invention:new knowledge or ideas
Innovation:application of knowledge
to production
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Invention:scandium alloy
Scandium alloys were first made commercially available in 1996 by the Ashurst Technology Group. Easton Sports first used Scandium alloys in February 1997, the product was the Redline C-Core bat. http://www.precisiontandems.com/eastonscandium.htm
Innovation:baseball batsbicycle frames
no bridge from invention to innovation
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
What Do I Care Who Owns It?
Collective farming
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
What do you call Khrushchev’s Hairstyle?
the Harvest
of ‘63
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Virgin Lands Campaign: 1954
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Soviet “tragedy of the commons”
the Aral Sea :an environmental
tragedy of the commons
resulting from Soviet collective
ownership
Economics Online for Teachers, Part 1
farmers’ market
private ownership changes incentives
1921 -New Economic Policy (NEP)
“State Capitalism”
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
“The Terror Famine” 1932-33
collectivization changes incentives
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Pollution: “tragedy of the commons”
Photos: http://www.gerdludwig.com/html/stories_soviet.html
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
Na Levo: “on the left”
Economics Online for Teachers, Part 1
Transaction Costs: Non-monetary costs that are
not captured in an exchange
Househol
ds
Cost
Benefit
Benefit
Cost
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Househol
ds
Cost
Benefit
Benefit
Cost
Transaction Costs: “Dead Weight” Costs
The Economic Demise of the Soviet Union
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
August, 1991
White House – Russia’s (not USSR’s) parliament
Economics Online for Teachers, Part 1The Economic Demise of
the Soviet Union
August, 1991
Boris Yeltsin declares Russia’s independence from the USSR
Economics Online for Teachers, Part 1
1940 Katyn Forrest Massacre
The Economic Demise of the Soviet Union
”I was dumb; I believed it all.
I would have given my life for the Motherland.” *
*Lenin’s Tomb by David Remnick
Economics Online for Teachers, Part 1
Reagan: On-going Challenge
The Economic Demise of the Soviet Union
“The Soviet Union is an Evil Empire, and Soviet communism is the focus of evil in the modern world”
March 8, 1983
Strategic Defense Initiative (“Star Wars”)
Economics Online for Teachers, Part 1
Afghanistan: Dec. 1979 – Feb. 1989
The Economic Demise of the Soviet Union
Soviet casualties:Killed: 15,000Wounded: 30,000# Served: 600,000Avg Troop strength: 100,000
Economics Online for Teachers, Part 1
Chernobyl Nuclear Accident: April 26, 1986
The Economic Demise of the Soviet Union Message: they don’t
care about us
Economics Online for Teachers, Part 1
Message: “they really don’t care about us”
The Economic Demise of the Soviet Union
Children born with deformed or
missing limbs, post-Chernobyl
Women gasping for breath after shift in cement plant
Photos from gerdludwig.com
Economics Online for Teachers, Part 1
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
35 0 0 70
34 2 1 68
33 4 2 66
32 6 3 64
31 8 4 62
30 10 5 60
29 12 6 58
28 14 7 56
27 16 8 54
26 18 9 52
25 20 10 50
24 22 11 48
23 24 12 46
22 26 13 44
21 28 14 42
20 30 15 40The Economic Demise of
the Soviet Union
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
30 0 0 60
29 2 1 58
28 4 2 56
27 6 3 54
26 8 4 52
25 10 5 50
24 12 6 48
23 14 7 46
22 16 8 44
21 18 9 42
20 20 10 40
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
27 0 0 54
26 2 1 52
25 4 2 50
24 6 3 48
23 8 4 46
22 10 5 44
21 12 6 42
20 14 7 40
19 16 8 38
18 18 9 36
17 20 10 34
16 22 11 32
15 24 12 30
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
25 0 0 50
24 2 1 48
23 4 2 46
22 6 3 44
21 8 4 42
20 10 5 40
19 12 6 38
18 14 7 36
17 16 8 34
16 18 9 32
15 20 10 30
14 22 11 28
13 24 12 26
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
15 0 0 30
14 2 1 28
13 4 2 26
12 6 3 24
11 8 4 22
10 10 5 20
9 12 6 18
8 14 7 16
7 16 8 14
6 18 9 12
5 20 10 10
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
40 0 0 80
39 2 1 78
38 4 2 76
37 6 3 74
36 8 4 72
35 10 5 70
34 12 6 68
33 14 7 66
32 16 8 64
31 18 9 62
30 20 10 60
29 22 11 58
28 24 12 56
27 26 13 54
26 28 14 52
25 30 15 50
24 32 16 48
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
45 0 0 90
44 2 1 88
43 4 2 86
42 6 3 84
41 8 4 82
40 10 5 80
39 12 6 78
38 14 7 76
37 6 8 74
36 18 9 72
35 20 10 70
34 22 11 68
33 24 12 66
32 26 13 64
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
50 0 0 100
49 2 1 98
48 4 2 96
47 6 3 94
46 8 4 92
45 10 5 90
44 12 6 88
43 14 7 86
42 16 8 84
41 18 9 82
40 20 10 80
39 22 11 78
38 2 12 76
Economics Online for Teachers, Part 1
Pencils Candy Pencils Candy
20 0 0 40
19 2 1 38
18 4 2 36
17 6 3 34
16 8 4 32
15 10 5 30
14 12 6 28
13 14 7 26
12 16 8 24
11 18 9 22
10 20 10 20
9 22 11 18
8 24 12 16
Recommended