After the beginnings of the twentieth century, neoclassical economics became better known, and socialists such as the Polish Marxist Oscar Lange were aware of the theory that market equilibrium could lead to an efficient allocation of resources. If planning should prove too difficult (they argued), a government-controlled economy could be run according to the same principles of supply and demand.


Remember, for the socialists (not the communists) the main thing about government ownership of enterprises was that it was a way of organizing a classless society. Enterprises should be owned by the government, not by a class of capitalist employers; and everyone should be an employee. But this does not quite mean that the economy is directed by the government. In a "market socialist" society, enterprises would be owned by the government, but independently run by appointed managers. The managers would be instructed to direct the enterprises in such a way as to maximize profits, at market prices, as (in theory) the directors of capitalist enterprises do. Thus, the various enterprises would adjust their production to an equilibrium of supply and demand. The allocation of resources would be efficient, as in the ideal market capitalist system. Since the profits would revert to the government, as owner, they could be distributed to the poor (or to everybody) as a "social dividend." Thus, a market socialist society would be an efficient, classless market society with a lower limit on income and thus no extreme poverty.


This is a very appealing ideal from the viewpoint of neoclassical economics. A few neoclassical economists, driven by logic rather than socialist convictions, endorsed market socialism as simply a superior economic system. However, as with all the ideals, there may be problems in practice.


Problems of Market Socialism
A system of independently managed government-owned enterprises maximizing profits at market prices would run into some of the same problems that market capitalism would. Like market capitalism, the values it would realize would be consumer preferences, not other kinds of values that some may feel are "higher." Monopoly and externality could also be problems, and perhaps "Keynesian" failures to employ the labor force might occur. Thus, in practice it would be necessary for a market socialist society (like a market capitalist society) to mix in a good deal of government control of the economy. On the other hand, centrally planned economies always had some markets. Thus, it might be hard, in practice, to find the boundary between real market socialism and real government-controlled socialism. During its period of communist government, the Hungarian Republic adopted reforms that made it a fair approximation to "market socialism," and the criticisms of market socialism in Hungary suggest a more general obstacle to market socialism.


The technical term is "soft budget constraints." The meaning is simpler than the term. If a government-owned enterprise should overspend its budget and lose money, what would happen? In practice, government would not allow the enterprise to fail, but would instead "prop it up" with subsidies and "bail it out" with more wasteful government capital investments. Thus, government-owned enterprises that really should be liquidated would never be liquidated, but would continue to exist, eating up government subsidies. Perhaps even worse, enterprises that could shape up and improve their efficiency would have no incentive to do so. As long as you can fall back on government subsidies to make up losses, why go to the trouble to improve efficiency? (After all, one way to increase in labor productivity is to eliminate your job).


But soft budget constraints are not a market socialist exclusive. Despite the abolition of communism in eastern Europe, "soft budget constraints" are still a problem there, according to many of the pro-market economic reformers. And, indeed, governments have been known to "bail out" enterprises with government investment and to "prop up" losing enterprises with subsidies even in countries which have never been socialist in any sense. Here in the United States, some losing Savings and Loan Companies were "bailed out" with government investments in the 1980's, and some of the beneficiaries were the relatives of prominent politicians of both major parties. The problem seems to arise unless the control of enterprises is distinctly separated from the control of government. When the government owns the enterprises, or the owners of enterprises control the government, "soft budget constraints" become a problem.


However, it is plausible that a real-world "market socialist" system would be especially vulnerable to the "soft budget constraint" problem, since the enterprise is government owned, the manager a political employee, and a separation between the control of enterprises and the control of government is especially difficult to establish.

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The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it. United State Constitution, Art. I Sec. 9 Par. 2

"Dissent is the Highest form of Patriotism" -- Howard Zinn

Also:

Economic Systems
The fundamental economic problem in any society is to provide a set of rules for allocating resources and/or consumption among individuals who can't satisfy their wants, given limited resources. The rules that each economic system provides function within a framework of formal institutions (e.g., laws) and informal institutions (e.g., customs).

In every nation, no matter what the form of government, what the type of economic system, who controls the government, or how rich or poor the country is, three basic economic questions must be answered. They are:

What and how much will be produced? Literally, billions of different outputs could be produced with society's scarce resources. Some mechanism must exist that differentiates between products to be produced and others that remain as either unexploited inventions or as individuals' unfulfilled desires.

How will it be produced? There are many ways to produce a desired item. It may be possible to use more labor and less capital, or vice versa. It may be possible to use more unskilled labor to substitute for fewer units of skilled labor. Choices must be made about the particular input mix, the way the inputs should be organized, how they are brought together, and where the production is to take place.

For whom will it be produced? Once a commodity is produced, some mechanism must exist that distributes finished products to the ultimate consumers of the product. The mechanism of distribution for these commodities differs by economic system.

Market Vs. Command Systems

One way to define economic systems is to classify them according to whether they are market systems or command systems. In a market system, individuals own the factors of production and individually decide how to use them. The cumulative decisions of these individuals are reflected in constantly changing prices, which result from the supply and demand for different commodities and, in turn, impact that supply and demand. The prices of those commodities are signals to everyone within the system indicating relative scarcity and abundance. Indeed, it is the signaling aspect of the price system that provides the information to buyers and sellers about what should be bought and what should be produced.

In a market system the interaction of supply and demand for each good determines what and how much to produce. For example, if the highest price that consumers are willing to pay is less than the lowest cost at which a good can be produced, output will be zero. That doesn't mean that the market system has failed. It merely implies that the demand is not high enough in relation to supply to create a market; however, it might be someday.

In a market economy the efficient use of scarce inputs determines how output will be produced. Specifically, in a market system, the least-cost production method will have to be used. If any other method was used, firms would be sacrificing potential profit. Any firm that fails to employ the least-cost technique will find that other firms can undercut its price. That is, other firms can choose the least-cost or any lower-cost production method and be able to offer the product at a lower price, while still making a profit. This lower price will induce consumers to shift purchases from the higher-priced firm to the lower-priced firm, and inefficient firms will be forced out of business.

In a market system, individuals make the choice about what is purchased; however, ability to pay, as well as the consumer's willingness to purchase the good or service, determine that choice. Who gets what is determined by the distribution of money income. In a market system, a consumer's ability to pay for consumer products is based on the consumer's money income. Money income in turn depends on the quantities, qualities, and types of the various human and non-human resources that the individual owns and supplies to the marketplace. It also depends on the prices, or payments, for those resources. When you are selling your human resources as labor services, your money income is based on the wages you can earn in the labor market. If you own non-human resources—capital and land, for example—the level of interest and rents that you are paid for your resources will influence the size of your money income, and thus your ability to buy consumer products.

Critics commonly argue that in a market system the rich, who begin with a disproportionately large share of resources, tend to become richer while the poor, who begin with a disproportionately small share of resources, tend to become poorer. They further argue that a government, which is designed to protect private-property rights, will tend to be exploited by those in power, which tends to be the economically wealthy. These critics argue that a market economy leads to selfish behavior rather than socially desirable outcomes.

In contrast, a command system is one in which decision making is centralized. In a command system, the government controls the factors of production and makes all decisions about their use and about the consumption of output. The central planning unit takes the inputs of the economy and directs them into outputs in a socially desirable manner. This requires a careful balancing between output goals and available resources.

In a command system the central planners determine what and how much will be produced by first forecasting an optimal level of consumption for a future period and then specifically allocating resources projected to be sufficient to support that level of production. The "optimal" level of production in a command economy is determined by the central planners and is consistent with government objectives rather than being a function of consumer desires.

As a part of the resource allocation process, the central planners also determine how production will take place. This process could focus on low-cost production or high quality production or full-employment of relatively inefficient resources or any number of other governmental objectives.

Finally, the command system will determine for whom the product is produced. Again, the focus is on socially-desirable objectives. The product can be allocated based on class, on a queuing process, on a reward system for outstanding or loyal performance, or on any other socially-desirable basis for the economy.

Critics commonly argue that because planned economies cannot effectively process as much relevant information as a market does, command economic systems cannot coordinate economic activity or satisfy consumer demand as well as market forces do. For example, consider an economic planning board of twenty people, that must decide how many coats, apartment buildings, cars, trains, museums, jets, grocery stores, and so forth should be built in the next five years. Where should these planners begin? How would they forecast the future need for each of these? Critics argue that, at best, planners would make a guess about what goods and services would be needed. If they guess wrong, resources would be misallocated and too much or too little production would take place. These critics argue that private individuals, guided by rising and falling prices and by the desire to earn profits, are better at satisfying consumer demand.

Capitalism

Under a capitalist economic system, individuals own all resources, both human and non-human. Governments intervene only minimally in the operation of markets, primarily to protect the private-property rights of individuals. Free markets in which suppliers and demanders can enter and exit the market at their own discretion are fundamental to the capitalist economic system. The concept of laissez-faire, that is, leaving the coordination of individuals' wants to be controlled by the market, is also a tenet of capitalism.
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The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it. United State Constitution, Art. I Sec. 9 Par. 2

"Dissent is the Highest form of Patriotism" -- Howard Zinn

What and how much will be produced? How will it be produced? For whom will it be produced? In a capitalist system, individuals own resources, either through inheritance or through industry. The individual receives compensation for the use of resources by others. This, combined with inherited wealth of the person, determines an individual's spending power. The accumulated spending power and the willingness of individuals to allocate resources to consumption determine demand. The availability and costs of resources, together with the potential for profits of firms, determine supply. In a market system the demand of consumers combined with the supply of producers determine what and how much will be produced.

Because of the economic competitiveness of the market system, the lowest-cost production method will be used. If anything other than the lowest-cost production method was being used, a competing firm would have an incentive to enter production to earn a greater profit and could afford to sell at a lower price, thus driving the original firm out of production. Consumers could then purchase more of the product at a lower price, allowing their limited resources to purchase more.

Production will be allocated to those with available resources and a willingness to purchase the output of production. These purchases then become information for suppliers in determining what and how much to produce in the future.

Thus, pure capitalism is an economic system based upon private property and the market in which—in principle—individuals decide how, what, and for whom to produce. Under capital ism, individuals are encouraged to follow their own self-interests, while the market forces of sup ply and demand are relied upon to coordinate economic activity. Distribution to each individual is according to his or her ability, effort, and inherited property. Typically the economies of Canada, the United States, and Western Europe are considered to be capitalist.

Socialism

Under a socialist economic system, individuals own their own human capital and the government owns most other, non-human resources— that is, most of the major factors of production are owned by the state. Land, factories, and major machinery are publicly owned.

What and how much will be produced? How will it be produced? For whom will it be produced? A socialist system is a form of command economy in which prices and production are set by the state. Movement of resources, including the movement of labor, is strictly controlled. Resources can only move at the direction of the centralized planning authority. Economic decisions about what and how much, how, and for whom are all made by the state through its central planning agencies.

In theory, socialism is an economic system based upon the individual's good will toward others, rather than a function of his or her own self-interest. Socialism attempts to influence individuals to take other people's needs into account and to adjust their own needs in accordance with what's available. In socialist economies, individuals are urged to consider the well-being of others; if individuals don't behave in a socially desirable manner, the government will intervene. In practice, socialism has become an economic system based on government ownership of the means of production, with economic activity governed by central planning. The economies of Sweden and France are examples of a socialist economic system.

Communism

Under a communist economic system, all resources, both human and non-human, are owned by the state. The government takes on a central planning role directing both production and consumption in a socially desirable manner.

What and how much will be produced? How will it be produced? For whom will it be produced? Central planners forecast a socially beneficial future and determine the production needed to obtain that outcome. The central planners make all decisions, guided by what they believe to be good for the country. The central planners also allocate the production to consumers based on their assessment of the individual's need. Basic human needs and wants would be met according to the Marxist principle, "From each according to his ability to produce, to each according to his need."

The economies of China, the former Soviet Union, and the former East Germany are examples of communist economies.

Mixed Economic Systems

In practice, most economies blend some elements of both market and command economies in answering the three fundamental economic questions: What and how much will be produced? How will it be produced? For whom will it be produced? Furthermore, within any economy, the degree of the mix will vary.

The economy of the United States is generally considered to be a free market or capitalist economic system. However, even in the United States the government has determined a "minimum wage," has set rules and regulations for environmental protection, has provided price supports for agricultural products, restricts the imports of items that might compete with local production, restricts the exports of sensitive output, provides for public goods such as a park system, and provides health and retirement services through Medicaid and Medicare. All of these detract from the essential nature of a capitalist economy. However, most decisions continue to be left to free markets, leaving the United States as a mixed economy that leans heavily toward the capitalist economic system.

In contrast, the economy of the former Soviet Union is generally considered to be communist. However, the strict controls of the central planning unit of the country tended to be more intensely focused on heavy industry, including the defense and aerospace industries, than on agricultural industries. Farmers often had significant freedom to produce and sell (or barter) what they wished.

Summary

Countries have scarce resources. The economic systems of countries are designed to allocate those resources, through a production system, to provide output for their citizens. The fundamental questions that these systems answer are:

. What and how much will be produced?
. How will it be produced?
. For whom will it be produced?

Market economies leave the answers to these questions to the determination of the forces of supply and demand while command economies use a central planning agency to direct the activities of the economy. Pure capitalist economies are market economies in which the role of government is to ensure that the ownership of the resources used in production are privately held. Socialist economies are primarily command economies where most non-human resources are owned by the state but human capital is owned by the individual. Communist economies are also command economies but all resources, both human and non-human, are owned by the state.

In practice, all economies are actually mixed economies, incorporating some facets of both market and command economies. The relative importance of the particular economic system in the country is the determinant of the type of economic system that it is generally considered to be

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The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it. United State Constitution, Art. I Sec. 9 Par. 2

"Dissent is the Highest form of Patriotism" -- Howard Zinn

Means of production (abbreviated MoP; German: Produktionsmittel), also called means of labour are the materials, tools and other instruments used by workers to make products. This includes: machines, tools materials, plant and equipment, land, raw materials, money, power generation, and so on: anything necessary for labor to produce. The term originates with Marx, who explicitly differentiates means of production from capital. For Marx, means of production were the instruments and materials of labor independent of the mode of producing and appropriating surplus. On the other hand means of production become capital, only within a particular set of social relations: when those means of production participate in the process of exploiting labor for surplus value.[1]

Means of production is sometimes confused with factors of production. The term factors of production is typically understood as an explanation for income as duly paid to owners of each means of production and also to the workers themselves within capitalism. By comparison, the term means of production applies to these means independent of their ownership and their compensation, and regardless of whether the mode of producing is capitalist, feudal, slave, communal or otherwise.


Ownership of MoP within capitalism
The analysis of people's relationships with the means of production is one element that stands at the basis of Marxism. Karl Marx focused on labor questions. He considered it a reification to treat labor as just another "factor" in production; it implied an inversion of means and ends, so that people were effectively used as things. The working classes are the principal productive forces of society, since their labor creates and conserves material wealth. The bourgeoisie, meanwhile, comprises people who own and trade in means of production as capital assets, and who hire workers to work for them, using those means of production. The bourgeois as property owner can obtain a profit from the work of his employees because the value of output exceeds the outlay on wages and materials. Therefore, the bourgeois obtains a surplus value from the work of his employees. In the Marxist view, this constitutes exploitation of the workers.[citation needed]

Marx's terms are often employed in economic analysis by socialists who advocate public ownership of some or all of the means of production. The affinity between labor movement causes and this advocacy is very strong - and often shared by social democrats, socialists, communists and greens. Marx's analysis in particular helped to make clear the key differences between capital and "labor".

Marxists define economic systems in terms of how the means of production are used, and which social class controls them. Thus, in capitalism, the means of production are controlled by the bourgeoisie (the "capitalists" - the owners of capital), while in socialism they are controlled by the people's elected representatives and in communism they are controlled collectively by the people themselves.

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The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it. United State Constitution, Art. I Sec. 9 Par. 2

"Dissent is the Highest form of Patriotism" -- Howard Zinn

Me thinks I'm somewhere between socialism and capitalism, But with earning caps on individuals. I mean, who is worth 10 million a year, lets be real here! We don't need captains of industry or sports moguls or movie stars making 10 million+++ a year, while some people are barely surviving! Talk about ridiculous! I'd say a million a year after taxes would be a fine cap! Look at what wealth has wrought. castles on hills overlooking the serfs. Million dollar 1967 fords, '70' plymouths, '70' Ls6 chevelles. Why a man cant even buy a 35 year old car for christs sake! The Mine is bigger than yours thing has gotten out of hand!

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

Med ...

Cuba, the Utopia of the Left, has tons of 1950s cars running around. You could probably pick one up at a reasonable price.

By the way, that "Million Dollar Cap" thingie?? That's exactly what the Czeck Republic had in force during the reign of the Soviet Union.

Vi

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Liberals are people that will believe anything twice.

Yeah a lot of million dollar opportunities existed in the czeck Republic I'll bet!

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Life is good, the water is sweet. The ground keeps moving beneath my feet.

They actually had a law that limited anyone from making over a million dollars. And, I bet they DID have quite a few. Those "few" would be the politically connected. As Orwell said ... all pigs are equal ... you know the rest by now.

Vi

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Liberals are people that will believe anything twice.

Actually Med some of the best Pilsner Breweries in the world are in the Czech Republic. Pilsner Urquell and Budvar (the predecessor to Budweiser) are two that come to mind.

__________________
The privilege of the writ of habeas corpus shall not be suspended, unless when in cases of rebellion or invasion the public safety may require it. United State Constitution, Art. I Sec. 9 Par. 2

"Dissent is the Highest form of Patriotism" -- Howard Zinn

Pilsner Urquel is a tasty beer!
Interesting and accurate summary of different political /economic philosophies. Thanks Dank


Here are some results of real life applications of the different hybrid systems in the real world.
To me the choice is simple!


Should we copy Europe?
By Walter E. Williams
Wednesday, November 22, 2006
Some Americans look to European countries such as France, Germany and its Scandinavian neighbors and suggest that we adopt some of their economic policies. I agree, we should look at Europe for the lessons they can teach us. Dr. Daniel Mitchell, research fellow at the Heritage Foundation, does just that in his paper titled "Fiscal Policy Lessons from Europe."
Government spending exceeds 50 percent of the GDP in France and Sweden and more than 45 percent in Germany and Italy , compared to U.S. federal, state and local spending of just under 36 percent. Government spending encourages people to rely on handouts rather than individual initiative, and the higher taxes to finance the handouts reduce incentives to work, save and invest. The European results shouldn't surprise anyone. U.S. per capita output in 2003 was $39,700, almost 40 percent higher than the average of $28,700 for European nations,.




Over the last decade, the U.S. economy has grown twice as fast as European economies. In 2006, European unemployment averaged 8 percent while the U.S. average was 4.7 percent. What's more, the percentage of Americans without a job for more than 12 months was 12.7 percent while in Europe it was 42.6 percent. Since 1970, 57 million new jobs were created in the U.S., and just 4 million were created in Europe.
Dr. Mitchell cites a comparative study by Timbro, a Swedish think tank, showing that European countries rank with the poorest U.S. states in terms of living standards, roughly equal to Arkansas and Montana and only slightly ahead of West Virginia and Mississippi. Average living space in Europe is just under 1,000 square feet for the average household, while U.S. households enjoy an average of 1,875 square feet, and poor households 1,200 square feet. In terms of income levels, productivity, employment levels and R&D investment, according to Eurochambres (The Association of European Chambers of Commerce and Industry), it would take Europe about two decades to catch up with us, assuming we didn't grow further.
We don't have to rely on these statistics to make us not want to be like Europeans; just watch where the foot traffic and money flow. Some 400,000 European science and technology graduates live in the U.S. European migration to our country rose by 16 percent during the 1990s. In 1980, the Bureau of Economic Analysis put foreign direct investment in the U.S. at $127 billion. Today, it's more than $1.7 trillion. In 1980, there was $90 billion of foreign portfolio investment -- government and private securities -- in the U.S. Today, there's more than $4.6 trillion, much of it coming from Europeans who find our investment climate more attractive.
What's the European response to its self-made economic malaise? They don't repeal the laws that make for a poor investment climate. Instead, through the Paris-based Organisation for Economic Co-operation and Development (OECD), they attack low-tax jurisdictions. Why? To support its welfare state, European nations must have high taxes, but if Europeans, as private citizens and businessmen, relocate, invest and save in other jurisdictions, it means less money is available to be taxed.
Dr. Mitchell addresses this issue through his research at the Center for Freedom and Prosperity (www.freedomandprosperity.org). The OECD has a blacklist for countries they've identified as "tax havens." The blacklisted countries include Hong Kong, Macao, Malaysia (Labuan) and Singapore. Also targeted are Andorra, Brunei, Costa Rica, Dubai, Guatemala, Liberia, Liechtenstein, the Marshall Islands, Monaco, the Philippines and Uruguay. The blacklisted jurisdictions have strong financial privacy laws and low or zero rates of tax.
The OECD member countries want the so-called tax havens to change their laws to help them identify the earnings of their citizens. Most of all, OECD wants these countries to legislate higher taxes so as to reduce their appeal. A suggestion that we should be more like Europe is the same as one suggesting that we should be poorer.
Townhall.com::Should we copy Europe?::By Walter E. Williams

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If you wind up with a boring, miserable life because you listened to your mom, your dad, your teacher, your priest or some guy on TV telling you how to do your shit, then YOU DESERVE IT.
~ Frank Zappa ~

Liberty means responsibility, that is why most men dread it.
~George Bernard Shaw~