Econ Test 2 Part 3
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Socialist Dream vs. Reality
- Dream: what you were taught in school
- Reality: what you saw on the street
- workers are in control
- fast economic growth
- equal job opportunities
- lots of consumer goods
- government's role: central planning then withering away of the gov't, safety net for everyone
- bureaucrats are in control
- fast accomplishments at first, then slower and slower
- women had professional positions
- military goods, consumer shortages
- new types of inequality
- government's role: no withering, good basic safety net
How are centrally planned production decisions made?
- comprehensive central plans told everyone what to produce
- state ownership of businesses and farms and natural resouces (private businesses were ususally illegal)
Who gets the results?
- low skilled workers: got higher wages, virtually no unemployment, consumer necessities were heavily subsidized (cheap/free housing, transportation, education, healthcare)
- people with political connections
- middle class professionals: women gained more professional opportunities
Who were the nomenklatura?
people who had easy access to luxury goods
What was Comecon?
- aka Council for Mutual Economic Assistance (CMEA)
- planned trade between the Soviet bloc countries
- central planning body
- encouraged each country to specialize based on their comparative advantage
In terms of information issues, why is a market system more efficient than a centrally-planned one?
- too much information had to be gather and processed
- info inaccuracies
- info processing was very slow
- diseconomies of scale (info problems inside companies)
What were state farm results, and how does the left-wing/right-wing idea explain them?
- left wing crops and animals vs. right wing crops and animals
- socialist farms can produce some crops and animals without too much problem (left wing)
- other crops and animals where better when raised in a free market environment (right wing)
- socialist farms had an easier time growing wheat than raising cattle
Businesses were politicized. Why was this bad for efficiency?
- people became manegers based on their connections, not by their skills
- resource allocation was influenced by political plans, bribes, and hoarding
- socialist business reports exaggerated successes and hid mistakes
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