Pure Centrally Planned Economy

AKA Communism• Objectives:

• Describe how the three basic economic questions are answered by the different economic systems, and identify their problems.

CommunismWhat are the problems

w/capitalism?

Problems w/capitalism

Is there a better way?

Pure Centrally Planned Marketaka Communism

• Public (gov) ownership of all resources

• Created by Karl Marx (1848) – – Society should share its resources to

ensure that the lower classes (workers) are provided for

Gov answers …

• What to produce?– What’s best for nation: capital goods, military

technology

• How?– Ensure that everyone is working

• For whom to produce?– Public

*No competition

Visible Hand• Gov decides • Focus on public goods,

NOT consumer goods

– Consumer goods are rationed (restricted/limited)

– In Communist countries – bread lines, years to get a car, better apartment, etc

HAVANA, CUBA: A woman walks with her government ration of bread at a government bakery in the central section of Havana, Cuba. Many staples, like bread, rice and meat are still rationed in Cuba.

Is communism better?

• Advantages • Disadvantages

p. 37-38

Better?!

• ADV : everyone is provided for

• DIS : few consumer items– No incentive to work harder – what will you

get if you work harder? Inefficient!– Waste – no pride of ownership b/c it’s never

your business or money! – Environmental damage.

Checkpoint # 2• Compare & contrast communism to

PURE capitalism • Which one is better and why? Explain

2 specific reasons.