Economics Dictionary of ArgumentsHome
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| Planned economy: A planned economy is an economic system where the government controls production, distribution, and prices, rather than market forces. Central authorities set goals, allocate resources, and regulate industries to achieve economic and social objectives. This system contrasts with market economies, where supply and demand drive economic decisions. See also Socialism, Communism, State capitalism, Economic systems._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Geoffrey C. Harcourt on Planned Economy - Dictionary of Arguments
Harcourt I 101 Planned Economy/Harcourt: We (…) compare [a] planned economy with a competitive capitalist market economy in which there is the same level of investment expenditure but also in which, initially, there is paid a wage which equals the full-employment marginal product of labour (…). We consider, first, a 'low' level of investment. In the planned economy the real-wage rate exceeds the full-employment marginal product of labour, being just great enough when spent to absorb that proportion of total butter output that has not been set aside as 'low' investment (…). >One-commodity model. Then, in the capitalist economy, unless capitalists' consumption were such as to just fill in the gap between total output produced and the sum of the expenditure of the total wage bill (…) and butter put to stock for the next period, there will be, initially, unintended stocks, i.e. disequilibrium. Harcourt I 102 Employment will fall until, with an unemployment rate (…) and a wage payment that equals the (now higher) marginal product of labour, aggregate demand for butter from all sources just matches the (now lower) aggregate supply (…). If investment were very 'large' so that in a socialist economy, the wage rate would be less than MPf (and workers 'exploited', no doubt for their own good), in the capitalist economy there would be excess demand for butter and labour.* (The outcome of the processes thereby set in motion may be found by consulting Solow and Stiglitz [1968](1).) Harcourt I 103 It is only when, given the consumption functions of the workers and capitalists, the level of investment is such as to give full employment without excess demand for labour that paying a wage rate equal to the full-employment marginal product of labour clears, simultaneously, both the goods and the labour markets (…). Hence the general need, if the real wage is viewed as a labour-market-clearing price, for an allwise government to set either the appropriate rate of interest (Meade [1961(2)] and Swan's [1956](3) solution) or to conduct an appropriate fiscal policy. In the butter economy, the rate of profits - a ratio of butter to butter- equals the marginal product of the existing butter stock (in this instance, the full-employment marginal product), as we are, in effect, back in Swan's world. >T. W. Swan. Moreover, the assumption of malleable-buttercapital is absolutely vital, for only then can the existing capital stock be instantaneously moulded into the form that is appropriate for cooperating with the existing, fully-employed, labour force. In fact, (…) in the short run with given specific equipments, relatively fixed technical coefficients of production and full capacity working, the marginal product of labour is indeterminate, being equal either to the average product (if employment is reduced) or close to zero (if it is increased). >Socialism, >Capitalism, >Economic models, >State capitalism, >R.M. Solow. * A similar analysis may be found in Eltis [1965](4), pp. 1-3. 1. Solow, R. M. and Stiglitz, J. E. [1968] 'Output, Employment and Wages in the Short Run', Quarterly Journal of Economics, LXXXII, pp. 537-60. 2. Meade, J. E. [1961] A Neoclassical Theory of Economic Growth (London: Allen and Unwin). 3. Swan, T. W. [1956] 'Economic Growth and Capital Accumulation', Economic Record, xxxn, pp. 334-61. 4. Eltis, W. A. [1965] 'A Theory of Investment, Distribution, and Employment,' Oxford Economic Papers, xvn, pp. 1-23._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Harcourt I Geoffrey C. Harcourt Some Cambridge controversies in the theory of capital Cambridge 1972 |
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