ECON SYSTEM REPORT
By Grace Yun
COMMAND ECONOMY - VIETNAM
• State determines resource allocation
• Doesn’t always make the right choice – poor
management
• Economy experienced rapid growth
• Slowed down – recently at 4% growth
• Inefficient state enterprises
• Approaching bankruptcy
• High inflation rate – 12%
MIXED ECONOMY (EUROPEAN
SOCIALISM) - FINLAND
• Unemployment has been decreasing
• Small GDP deficit
• Approximately 1%
• There are private enterprises
• Example: Nokia
• Loss of competition
• Led to increase in costs and decrease in exports
MARKET ECONOMY - AUSTRALIA
• Improving GDP growth rate
• 4.3% higher in 2012 than 2011
• Effective coordination within economy
• “Strongest economy in the developed world”
• Low unemployment rate
• 5.2%
COMPARISON – COMMAND & MIXED
Similarities
Differences
The government is involved in resource allocation
In command economies the government has more
influence over the market than in mixed economies
Both economies have government-owned enterprises
There is more incentive to be efficient in mixed
economies than in command economies (mixed
economies have less moral hazard
In mixed economies there are private enterprises
COMPARISON – COMMAND & MARKET
Similarities
Differences
Both systems can lead to economic growth
Command economies don’t provide incentives,
market economies do
Both systems can have limited competition
(although for different reasons)
In command economies the government
determines competition, whereas in market
economies supply and demand determine
competition
Both systems can result in low unemployment rates
Command economies value equality over efficiency,
and vice versa for market economies
COMPARISON – MARKET & MIXED
Similarities
Differences
Both systems can have decreasing/low
umemployment rates
Market economies have less government
intervention than mixed economies do
Both systems have face loss of competition
In a market economy, supply and demand
determine resources allocation, whereas in a mixed
economy there are other main factors
OVERALL COMPARISON
• SIMILARITIES: all three economies have producers,
suppliers, goods, services, price, and income. They can
also all have low unemployment rates and face limited
competition.
• DIFFERENCES: the level of government intervention in the
market is the factor that changes in the three economies –
this influences incentives to be efficient. The less moral
hazards there are, the more efficient companies try to be.
COMMAND ECONOMY - VIETNAM
Theory: Everything is owned by the government
• FALSE: There are private enterprises
Theory: Due to moral hazards, state-owned
companies are not as efficient as they could be
• TRUE: Vietnam’s state-owned companies are inefficient
(use 40% of capital, but contribute to 25% of the GDP)
CONTINUED - VIETNAM
• ABILITY TO ALLOCATE RESOURCES EFFECTIVELY:
• In theory, Vietnam values equality over efficiency –
meaning that in command economies the the
allocation of resources is not very effective;
• This is apparent in the 12% inflation rate and also by
the fact that numerous companies are close to being
insolvent
MIXED ECONOMY (EUROPEAN
SOCIALISM) - FINLAND
Theory: Less government intervention than in
command economies
• TRUE: There are private enterprises, and one (Nokia) in
particular had and still has a big impact on Finland’s GDP
Theory: In public sectors there is little incentive to
work hard, so people don’t work hard
• FALSE: Finland’s public schools teachers provide one of the
most effective educations offered – Finland’s students are
among the best in the world at reading, math, and science
CONTINUED - FINLAND
• ABILITY TO ALLOCATE RESOURCES EFFECTIVELY:
• In theory, there should be a balance between
equality and efficiency in mixed economies – as
Finland is more command-leaning, equality would be
prioritized;
• Resource allocation is very effective – i.e. schools
are able to provide free meals, health care, and
counseling to their students
MARKET ECONOMY - AUSTRALIA
Theory: Will face problems with umemployment and
inflation rates
• FALSE: Australia has low unemployment rates, and her inflation
rate is not high
Theory: Because the demand and supply determine
resource allocation, efficiency will be achieved
• TRUE: Australia has seen good efficiency, as evident in their
stable economic growth and good business investments
CONTINUED - AUSTRALIA
• ABILITY TO ALLOCATE RESOURCES EFFECTIVELY:
• In theory, because individuals are able to act
according to their self-interest, resources should be
allocated effectively, with each person trading
something to get what he/she wants;
• This is manifest in the way that the government has
been able to increase spendings in a variety of
areas such as food, health, education, and
transportation.
• It is also shown in the salary increases that many
companies granted to their workers
THANK YOU