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Modern Econ. Systems State&Market


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Modern Econ. Systems State&Market

  1. 1. COMPARATIVE ECONOMICS Modern Economic Systems – The State and The Market
  2. 2. The classification of economic systems <ul><li>Technological level and institutions </li></ul><ul><li>The role of property </li></ul><ul><li>The allocation of the production factors </li></ul><ul><ul><li>Work </li></ul></ul><ul><ul><li>Capital </li></ul></ul><ul><ul><li>Land </li></ul></ul>
  3. 3. The institutional shell <ul><li>The forms of public service </li></ul><ul><li>The scheme of economic regulation by the state </li></ul><ul><li>The redistribution methods of income sources and income </li></ul><ul><li>The specific forms of property </li></ul><ul><li>The peculiarity of money </li></ul>
  4. 4. Typifying the economic systems (I.) <ul><li>Early theories of the stages of growth: the stressing of singular factors (for instance: production or allocation): the differences between systems disappear </li></ul><ul><li>Marx and Engles: the relation between the historical development of the social economic system and the forces of production </li></ul><ul><li>Late theories of the stages of growth: Rostow and the distinct role of economic growth </li></ul>
  5. 5. Typifying the economic systems (II.) <ul><li>Walter Eucken and the thinking in terms of a system: the morphological apparatus of the description of the ideal economic systems </li></ul><ul><ul><li>Centrally planned economy and the barter economy </li></ul></ul><ul><ul><li>The distinct factor: the extent of the customer’s freedom </li></ul></ul><ul><li>National Economies and the Global Economy </li></ul>
  6. 6. Cooperation and conflict <ul><li>Selfishness and malevolence </li></ul><ul><li>Cooperation and selfishness </li></ul><ul><li>Envy and competition </li></ul><ul><li>Price, quantity, competition, cooperation: the contradictions of the enforcement of self-interest </li></ul><ul><li>The role of the time factor in the resolution of the prisoner's dilemma </li></ul>
  7. 7. Developed societies (market economies) The frequency distribution of preferences Benevolent Neutral , Self-interested Malevolent
  8. 8. Undeveloped societies (non-market economies) The frequency distribution of preferences Benevolent Neutral , Self-interested Malevolent
  9. 9. State and market in modern capitalism <ul><li>The development of private property </li></ul><ul><li>The family enterprise </li></ul><ul><li>The measurement of performance </li></ul><ul><li>The institution of unlimited liability </li></ul><ul><li>Governance/management and property </li></ul><ul><li>Owner and manager </li></ul>
  10. 10. Owner and manager <ul><li>The softening of property rights </li></ul><ul><li>Limiting the special interest of the manager </li></ul><ul><li>Competition on the capital markets – the signaling role of stock prices </li></ul><ul><li>Competition on the product markets – (also) the evaluation of the managers’ performance </li></ul><ul><li>Competition on the market of managers – higher profitability higher managerial value </li></ul>
  11. 11. State sector in the modern market economy <ul><li>Expansion and contraction </li></ul><ul><li>Market failures and nationalization </li></ul><ul><li>State failures and (re)privatization </li></ul><ul><li>Public goods – mixed goods – private goods </li></ul><ul><li>The S tate and the manager: </li></ul><ul><ul><li>The danger of the softening up of the budgetary constraint </li></ul></ul><ul><ul><li>Contradicting owner </li></ul></ul>
  12. 12. Which is the more efficient economic solution? <ul><li>The general rule </li></ul><ul><li>Specific situation, specific actors, specific institutions, specific „playing-field” </li></ul><ul><li>The economic context of the political system </li></ul><ul><ul><li>The role of the voters and the interest groups </li></ul></ul><ul><li>The effects of the world market </li></ul>
  13. 13. The explanatory factors of the growth in state spending Factors Economic Wagner’s law (demand side) Baumol effect (supply side) Political The theory of bureaucracy Party competition Interest groups Voters and fiscal illusion Election and party systems Other factors Tax system The effect of the world market
  14. 14. Wagner’s law <ul><li>The law predicts that the development of an industrial economy will be accompanied by an increased share of public expenditure in gross national product: </li></ul><ul><li>Industrialization – urbanization – negative effects – „over crowding effect” – state intervention </li></ul><ul><li>Historical and cultural differences: same level of development – different state intervention </li></ul><ul><li>The state budget can grow more under recession than under the circumstances of good economic performance </li></ul>
  15. 15. The Baumol effect <ul><li>The productiveness growth of services < industrial productiveness (Two-sector model; under proportionate growth and same wage growth) </li></ul><ul><li>An increasing rate of social product and manpower is concentrating into services growth slows </li></ul><ul><li>The state plays a larger role in service sector the size of the state grows </li></ul>
  16. 16. The political system and the economy (I.) <ul><li>The theory of bureaucracy: the waste of resources, because of the (individual rational) behavior of the members of the bureaucracy </li></ul><ul><li>Public welfare – individual interest </li></ul><ul><li>The goal of self-preservation builds into the state administration </li></ul><ul><li>The growth of the bureaucracy does not go togther with the proporationate growth in the services provided by it. </li></ul><ul><li>The lack of the supply sanction </li></ul><ul><li>The limits of monitoring the bureaucracy </li></ul>
  17. 17. The political system and the economy ( I I.) <ul><li>Parties and public welfare vs. Power </li></ul><ul><li>Vote maximizing public expenditures </li></ul><ul><li>Public expenditures and taxes: the inclination of the political parties for income redistribution </li></ul><ul><li>Rational ignorance smaller state than necessary (Downs, 1974) </li></ul><ul><li>Present and future in the behavior of the voter </li></ul><ul><li>Group-specific public goods (Buchanan and Tullock [1962]) excessive state spending </li></ul>
  18. 18. The political system and the economy ( II I.) <ul><li>Interest groups (Olson [1997] the free riding phenomenon and the (negative and positive) selective incentives) </li></ul><ul><li>The competition of interest groups can either increase or decrease state spending </li></ul><ul><li>Partisan-politics hypothesis (Kohl, 1987) </li></ul><ul><ul><li>Ideological distance </li></ul></ul><ul><ul><li>Fragmentedness or concentration </li></ul></ul><ul><ul><li>The dynamics of coalition building: product bundling </li></ul></ul><ul><li>State spending and the political left </li></ul><ul><li>Social expenditures and the moderate right </li></ul>
  19. 19. The political system and the economy ( IV .) <ul><li>State structure centralism or federalism </li></ul><ul><li>Tax system: direct and indirect taxes </li></ul><ul><li>Institutional moment of inertia </li></ul><ul><li>The effect of the world market </li></ul><ul><ul><li>Open economies </li></ul></ul><ul><ul><li>Industrial concentration </li></ul></ul><ul><ul><li>Union concentration </li></ul></ul><ul><ul><li>Collective bargaining </li></ul></ul><ul><ul><li>Left-wing governments </li></ul></ul><ul><ul><li>Increased in income supplementing spending </li></ul></ul><ul><ul><li>The expansion of state spending </li></ul></ul><ul><li>Contradictions </li></ul>
  20. 20. Keynesian economy (I.) <ul><li>Regulations based on mass production and mass consumption </li></ul><ul><li>Mass production organizations amassing large sums of capital </li></ul><ul><li>Sensitivity to the changes in consumer income </li></ul><ul><li>Wages Demand Profit </li></ul><ul><li>Wage bargaining </li></ul><ul><li>Deficit financing and demand regulating state interventions </li></ul><ul><li>International financial system (Bretton Woods) </li></ul>
  21. 21. Keynesian economy (II.) <ul><li>The theory of social coalitions </li></ul><ul><li>The culture, elasticity or rigidity of state bureaucracy </li></ul><ul><li>The crisis of the Keynesian economic policy </li></ul><ul><li>A move towards a liberalism </li></ul><ul><li>The disintegration of the social coalition </li></ul><ul><li>The crisis of mass production (?) </li></ul>
  22. 22. The historical types of the capitalist economy <ul><li>Competition and regulation </li></ul><ul><ul><li>Nationalization – privatization </li></ul></ul><ul><ul><li>Regulation – deregulation </li></ul></ul><ul><li>Losses created by the State > Losses created by the market </li></ul><ul><li>The mixed economic systems </li></ul><ul><ul><li>Market driven economy </li></ul></ul><ul><ul><li>Negotiated economy </li></ul></ul><ul><ul><li>State driven economy </li></ul></ul>