Such a waste of inputs as these economists described could not of course continue in the kind of economy where these inputs would have to be purchased in competition with alternative users, and where the enterprise itself could survive only by keeping its costs lower than its sales receipts. In such a price-coordinated capitalist system, the amount of inputs ordered would be based on the enterprise’s most accurate estimate of what was really required, not on how much its managers could persuade higher government officials to let them have. These higher officials could not possibly be experts on all the wide range of industries and products under their control, so those with the power in the central planning agencies were to some extent dependent on those with the knowledge of their own particular industries and enterprises. This separation of power and knowledge was at the heart of the problem.
Central planners could be skeptical of what the enterprise managers told them but skepticism is not knowledge. If resources were denied, production could suffer— and heads could roll in the central planning agencies. The net result was the excessive use of resources described by the Soviet economists. The contrast between the Soviet economy and the economies of Japan and Germany is just one of many that can be made between economic systems which use prices to allocate resources and those which have relied on political or bureaucratic control.
Economics general
I though capitalism means that the means of production are privately owned, while communism means they are publiquely owned.
Free market is on another level, since it is not about production, but about the exchanges of the production.
>I though capitalism means that the means of production are privately owned, while communism means they are publiquely owned.
well, i guess you were wrong then, werntchya?
see
and
for some clarification on "capitalism", more aptly called a price coordinated market.
Ok, but does that fully require private profit ?
Also european, public health systems are more efficient than the US one.
>Ok, but does that fully require private profit ?
>Also european, public health systems are more efficient than the US one.
you should probably read this before, while, or after you finish basic economics
The many products which remained unsold in stores or in warehouses in the Soviet Union, while there were desperate shortages of other things, were a sign of the fatal weakness of central planning. But, in a price-coordinated economy, the labor, management, and physical resources that went into producing unwanted products would have had to go into producing something that could pay its own way from sales revenues. That means producing something that the consumers wanted more than they wanted what was actually produced. In the absence of compelling price signals and the threat of financial losses to the producers that they convey, inefficiency and waste in the Soviet Union could continue until such time as each particular instance of waste reached proportions big enough and blatant enough to attract the attention of central planners in Moscow, who were preoccupied with thousands of other decisions.
>Ok, but does that fully require private profit ?
yes profits are privately owned. Exactly how much of are you entitled to what another person has worked for?
>scarce goods which have alternative uses.
Children's food (nutritional health) is stolen from them and turned into alcohol and other drugs.
Why are you projecting emotional irrationality onto a rational, albeit extremely intricate, system of exchanges?
Prices in a market economy are not simply numbers plucked out of the air or arbitrarily set by sellers. While you may put whatever price you wish on the goods or services that you provide, those prices will become economic realities only if others are willing to pay them— and that depends not on whatever prices you have chosen but on what prices other producers charge for the same goods and services, and what prices the customers are willing to pay. Even if you produce something that would be worth $100 to a customer and offer it for sale at $90, that customer will still not buy it from you if another producer offers the same thing for $80. Obvious as all this may seem, its implications are not at all obvious to some people— those who blame high prices on “greed,” for example, for that implies that a seller can set prices at will and make sales at those arbitrary prices. For example, a front-page news story in The Arizona Republic began:
>Greed drove metropolitan Phoenix’s home prices and sales to new records in 2005. Fear is driving the market this year.
This implies that lower prices meant less greed, rather than changed circumstances that reduce the sellers’ ability to charge the same prices as before and still make sales. The changed circumstances in this case included the fact that homes for sale in Phoenix remained on the market an average of two weeks longer than the previous year before being sold, and the fact that home builders were “struggling to sell even deeply discounted new homes.” There was not the slightest indication that sellers were any less interested in getting as much money as they could for the houses they sold— that is, that they were any less “greedy.”