1. Main Ideas of State Ownerships and Central Planning
Allocation by Directives: By determining the composition of
output central planners created planning directives.
Government Price-Setting: The government sets the pricing of all
needs and wants. Central planners are more likely to change the
prices of necessities than the prices of consumer goods.
Self-Sufficiency: Soviet Union and China do not trust one
another, therefore each country maintained a strong military on
the common border.
Passive Macroeconomic Policies: For China and the Soviet
Union money and prices only played a limited role in determining
what the countries need. The countries were mainly focused on
unemployment.

2. Examples of the Main Ideas
Governemnt Price-Setting: Rents housing in the Soviet Union averaged
only 3 percent of income and remained at that level between 1928
and 1992.
Self-Sufficiency: Each country severely restricted trade with western
nations, and neither country encouraged easy convertibility between
their respective currencies and those of other countries.
Passive Macroeconomic Policies: Monetary policies (changes in the
money supply and interest rates) and fiscal policy (changes in
government spending and taxes) are passive examples.

3. Personal Opinion
“One of the most important issues to Americans is how to manage
prescription drug prices, especially for seniors who depend on
Medicare coverage. Some policy advocates are urging the federal
government to contract directly with drug manufacturers to purchase
drugs forseniors – at prices set by the government. Despite the
highminded intentions of these advocates, such price controls could
be very harmful to Americans’ future health. When prices are held
below natural levels, resources such as talent and investor capital
leave an industry to seek a better return elsewhere. This means that
there will be less discovery and innovation, and fewer new drugs will
become available to consumers. Often this change happens over
the long term — longer than the tenure of any policymaker. Thus, it
is vitally important to remind policymakers of the effects of price
controls whenever they are proposed as government policy.”
By: Fionna M. Scott Morton