What is an economic system?
Economic system – 1) a way of organizing the economic activities of a society, in accordance with which the problem of distributing limited resources is solved;

2) an established and operating set of principles, rules, laws that determine the form and content of basic economic relations that arise in the process of production, distribution, exchange and consumption of an economic product;

3) organization of economic life.

Types of economic systems.
The type of economic system is characterized by: 1) forms of ownership; 2) ways of distributing limited resources; 3) ways of regulating the economy.

Classification No. 1: 1) traditional; 2) command (centralized); 3) market; 4) mixed.

1) Traditional economic system- a way of organizing economic life in which land and capital are in the common possession of the tribe, and limited resources are distributed in accordance with long-standing traditions.
Questions about what goods and services to produce for whom and how are decided on the basis of traditions passed down from generation to generation.
Advantages: 1) stability of society; 2) sufficiently high quality of the goods produced.
Disadvantages: 1) lack of technical progress; 2) poor adaptability to changes in external conditions; 3) limited number of goods produced.

2) Command (centralized, directive, planned) economic system- a way of organizing economic life in which capital and land are owned by the state, and the distribution of limited resources is carried out according to the instructions of the central government and in accordance with plans.
Advantages: 1) the ability to concentrate all the forces and resources of society to solve any problem (mobilization capabilities); 2) guarantees people the necessary minimum of life’s goods, providing confidence in the future; 3) avoids unemployment, although universal employment is achieved, as a rule, by artificially restraining the growth of labor productivity.
Disadvantages: 1) the inability to accurately plan all the needs of society and distribute resources accordingly, which leads to overproduction of some goods and shortages of others; 2) lack of incentive to produce quality goods; 3) lack of economic freedom among citizens.

3) Market economic system- a way of organizing economic life in which capital and land are owned by individuals and scarce resources are distributed through markets.
A market economy is an economy in which private ownership predominates, economic activity is carried out by economic entities at their own expense, and all major decisions are made by them at their own peril and risk.
Fundamentals of a market system: 1) private property rights; 2) economic freedom; 3) competition.
Private property is the socially recognized right of individual citizens and their associations to own, use and dispose of a certain volume (part) of any type of economic resources.
Advantages: 1) flexibility, ability to adapt to changing conditions; 2) the presence of incentives for technical progress; 3) rational (???) use of resources.
Disadvantages: 1) inability to ensure income equality and a consistently high standard of living; 2) weak interest in fundamental scientific research; 3) instability of development (crises, inflation); 4) ineffective use of irreplaceable resources; 5) lack of full employment and price stability.

Each economic system answers three questions differently: 1) what to produce?; 2) how to produce?; 3) for whom to produce?

What to produce? 1) traditional: products of agriculture, hunting, fishing, few products and services are produced, and what to produce is determined by customs and traditions; 2) centralized: determined by groups of professionals: engineers, economists, representatives of industry - “planners”; 3) market: determined by consumers themselves, producers produce what can be purchased.

How to produce? 1) traditional: they produce in the same way and with what their ancestors produced; 2) centralized: determined by the plan; 3) market: determined by the producers themselves.

For whom to produce? 1) traditional: most people exist on the brink of survival, the additional product goes to the leaders or land owners, the rest is distributed according to customs; 2) centralized: “planners,” directed by political leaders, determine who and how much will receive goods and services; 3) market: consumers get as much as they want, producers make a profit.

4) In many countries there is mixed economy, which combines the features of market and command economic systems, economic freedom of producers and the regulatory role of the state.
A mixed economy is a way of organizing economic life in which land and capital are privately owned, and the distribution of limited resources is carried out both by markets and with significant government participation.

Classification No. 2: 1) market; 2) non-market (traditional and centralized); 3) mixed.

Classification No. 3: 1) commodity economy (centralized system, market system, mixed system); 2) subsistence farming.

Natural economy– 1) an economy in which people produce products only to satisfy their own needs, without resorting to exchange, to the market; 2) a farm that satisfies its needs through its own production.
Commodity farming– 1) an economy in which products are produced for sale, and the connection between producers and consumers is carried out through the market; 2) an economy in which production is market-oriented.

The term "property" used in three meanings:
1. As a synonym for the word “thing” (ordinary, everyday meaning).
2. Legal ownership includes three powers (powers) that only the owner can have: 1) possession (actual possession of this property, legally secured); 2) use (the process of extracting useful properties from a given property); 3) disposal (determining the future fate of this property = sale, donation, exchange, inheritance, rental or pledge, etc.).

Rent (from Latin arrendare - to give for rent) - 1) provision of property (land) by its owner for temporary use to other persons on contractual terms, for a fee; 2) the right to use without having the right to dispose.

Trust (from the English trust - trust) - 1) the right of the owner to transfer the right to manage his property to another person, without the right to interfere in his actions; 2) the institution of trust property, associated with the transfer of property and their property rights by the trust founder (beneficiary) for a certain period of time to the trustee.

Property as an economic category – 1) relations between people in the process of production, distribution, exchange and consumption regarding the appropriation of production resources, factors of production of material goods; 2) the ownership of things, material and spiritual values ​​by certain persons, the legal right to such ownership and economic relations between people regarding the ownership, division, redistribution of property objects.

Subjects of ownership: 1 person; 2) family; 3) labor collective; 4) social group; 5) population of the territory; 6) governing bodies of all levels; 7) the people of the country.

Properties: factors of production and finished products: 1) land, land plots, land; 2) money, currency, securities; 3) material and property values; 4) natural resources; 5) jewelry; 6) buildings for social and cultural purposes; 7) fixed production assets; 8) labor force; 9) spiritual, intellectual and information resources.

Functional characteristics of the property: 1) ownership, 2) management, 3) control.

Which of these characteristics is the most important?
1. Karl Marx put ownership first.
2. In the 20th century. Property management is becoming increasingly important.

Technocracy (Greek ?????, “skill” + Greek ??????, “power”) is a socio-political system in which society is regulated by competent scientists and engineers based on the principles of scientific and technical rationality.
Technocratic ideas were expressed by A. A. Bogdanov, who coined the term “technical intelligentsia” (in 1909 in the article “Philosophy of a Modern Naturalist”), while the term “technocracy” itself is an Americanism that appeared in the 1920s. Initially, the idea of ​​technocracy as the power of engineers was described by Thorstein Veblen, in the social utopia “Engineers and the Price System” (1921). Veblen's ideas were developed by James Burnham in The Managerial Revolution (1941) and John Kenneth Galbraith in The New Industrial Society (1967).
Thanks to the scientific and technological revolution, knowledge becomes the basis of power, subordinating both strength and wealth. The very face of power is also changing - abandoning direct and brutal domination, it takes on softer forms of influence and domination. Now the level of knowledge, and not the presence or absence of private property, becomes the main source of social differences. Power in the information age passes from those who give orders to those who shape the consciousness of people, laying into it certain stereotypes, images, and patterns of behavior.
Meaning creators are the creative layer of the information society, the “creative class,” which forms behavioral stereotypes, patterns of perception and action of the media and through them influences the worldview and behavior of broad layers of citizens. Real power is increasingly moving into the shadows, to various non-governmental influence groups, often international or simply foreign. The official government only formalizes and implements the policies developed in these circles. Hard power, based on violence, has given way to “soft power”, based on persuasion of people, ideological work, and subtle manipulation of public consciousness.
“Soft power” is a new historical type of power, based not on direct violence or economic enslavement, but on persuasion and information manipulation. “Soft power” is turning into the main instrument of power in the information age, when previous methods of domination lose their effectiveness and the need arises for the hidden and unobtrusive subordination of people to the interests of others.
The material basis of “soft power” is formed by the triumvirate “1) meaning creators – 2) non-governmental organizations – 3) the media.”

How are the different types of property different?
Those who own the means of production, how and by whom the income from the use of property is distributed, and who is a participant in economic activity.
Classification No. 1: 1) general (primitive communal, family, state, collective); 2) private (labor = family, farm, individual labor activity; non-labor = slave-owning, feudal, bourgeois-individual); 3) mixed (joint-stock, cooperative, joint).
1) Historically, the first type of property was common property, in which all people were united into groups and all means of production and produced goods belonged to all members of society.
2) The second in time of origin was private property, in which individual people treated the means of production as belonging personally only to them. Private property is a form of legal assignment to a person of the rights to own, use and dispose of any property, which he can use not only to satisfy personal needs, but also to conduct commercial activities. Private property was dominant in the economy until the 20th century. Opponents of private property pointed out that it is a source of exploitation of man by man, contributes to the separation of people, develops in them such qualities as selfishness, individualism and greed, and creates inequality between people. Proponents of private property argued that the feeling of private property is a natural feeling of a person that expresses his nature. In their opinion, it is private property that gives an individual the opportunity not to depend on the state, being a guarantee of human rights.
3) In the 19th century. The main figure of the owner was the capitalist - the entrepreneur. In the 20th century Various types of mixed (collective-private, group, corporate) property, which combines the characteristics of the first two types, have developed. A typical form of such ownership is a joint stock company (corporation).
A corporation (Latin corporatio - association, community) is a form of organization of an enterprise where the right to property is divided into parts by shares, and therefore the owners of corporations are called shareholders.
Unlike a sole proprietor and partnership members, the most a shareholder can lose is the amount they paid for the shares. Shareholders can move in and out of the corporation simply by purchasing shares. The capital of such a company is formed as a result of the sale of securities - shares, which are evidence that their owner has made a contribution - a share - to the capital of the corporation and has the right to receive a dividend. Dividend is part of the profit that is paid to the owner of shares (usually in proportion to the size of the share contributed by him).

Classification No. 2: 1) private (personal, individual); 2) state; 3) collective, joint.
Individual private property is widespread (agriculture, crafts, trade, services).
Signs of an individual private enterprise: 1) ownership of the means of production used; 2) the use of personal labor of the manufacturer, his family, and employees; 3) the right to individually dispose of income from economic activities; 4) the right to economic independence in resolving economic issues.
In the economy of the late 20th century. the importance of state ownership is high (from 15 to 20%). Typically, the state concentrates in its hands enterprises and industries of strategic importance (railroads, communications enterprises, nuclear and hydroelectric power plants).
Such forms of ownership as cooperative and collective ownership have also been preserved. With cooperative ownership, a group of people who have come together to jointly use some property (own or rented) manages this property. In a collective enterprise, the owner is the team of this enterprise, which takes part in managing the production process.
Municipal form of ownership is a form of ownership in which property is at the disposal and control of local authorities.

Forms of ownership in Russia.
According to the Constitution of the Russian Federation, in Russia 1) private, 2) state, 3) municipal and other forms of property are recognized and protected equally. The list of forms of ownership specified in the Constitution and the Civil Code (Civil Code) of the Russian Federation is not exhaustive, since it is accompanied by a reservation, by virtue of which other forms of ownership are recognized in the Russian Federation.

Privatization(Latin privatus – private) – 1) transfer of state property to individual citizens or legal entities created by them; 2) the process of denationalization of ownership of the means of production, property, housing, land, and natural resources. It is carried out through the sale or gratuitous transfer of state and municipal property into the hands of collectives and individuals with the formation on this basis of corporate, joint-stock, and private property.
Nationalization(Latin natio – people) – transfer of private property into the hands of the state.

Market and capitalism.
Version No. 1. Capitalism = market system.
Capitalism is a type of society based on private property and a market economy.
In various currents of social thought it is defined as a system of free enterprise, a stage of development of an industrial society, and the modern stage of capitalism is defined as a “mixed economy”, “post-industrial society”, “information society”, etc.; in Marxism, capitalism is a socio-economic formation based on private ownership of the means of production and exploitation of wage labor by capital.

Version No. 2. Capitalism? market system.
Capitalism is not just a method of efficient economic activity that naturally arises in the bosom of a market economy. Capitalism is an intellectual, psychological and social breakthrough that is inaccessible to a pagan, a person of traditional culture.
What distinguishes capitalism from the market is not so much the subject of activity as its method, scale, and goals. Fernand Braudel, describing this complex phenomenon, called it “anti-market”, since clearly different activities are carried out here, unequal exchanges, in which competition, which is the basic law of the so-called market economy, does not occupy its due place.
Fernand Braudel (1902 - 1985) - an outstanding French historian. Laid the foundations of the world-systems approach.
Braudel's most famous work is considered to be his three-volume work “Material Civilization, Economics and Capitalism, XV-XVIII Centuries.” (1979). This book shows how the economies of European (and other) countries functioned in the pre-industrial period. The development of trade and money circulation is characterized in particular detail; much attention is also paid to the influence of the geographical environment on social processes.
Arnold Toynbee:
“I believe that in all countries where maximum private profit acts as the motive of production, the private enterprise (market) system ceases to function.”

What is capitalism?
Capitalism is a holistic ideology, plan and scenario of a specific world order, the essence of which is not production or trade operations itself, but systemic operations aimed at controlling the market and aiming at extracting systemic profit (sustainable super-profit).
A rough, not very accurate and certainly unsightly analogue can be certain features of the activities of the mafia, moreover, in the “classical” sense of the concept, i.e. not as a crime, but as a specific system of governing the world, controlling it, and collecting tribute.
Capitalism acquires universal power not through administrative, national structures, but mainly through international economic mechanisms. Such power by its nature is not limited to state borders and extends far beyond its borders.
George Soros. The crisis of world capitalism. Open Society in Danger:
“The analogy with empire is justified in this case, because the system of global capitalism controls those who belong to it, and it is not easy to escape from it. Moreover, it has a center and a periphery like a real empire, and the center benefits at the expense of the periphery. More importantly, the system of world capitalism exhibits imperialist tendencies... It cannot be at peace as long as there are any markets or resources that are not already drawn into its orbit. In this respect, it is not much different from the empire of Alexander the Great or Attila the Hun, and its expansionist tendencies may be the beginning of its demise.”
The breeding ground of capitalism, its magnetic field, lines of force historically develop in the nervous plexus of financial schemes and the trophy economy of the crusades, mainly in the coastal areas of Europe (with the exception of the “land port” of fairs in Champagne). His ancestral nests are, first of all, the city-states and regions of Italy: Venice, Genoa, Florence, Lombardy, Tuscany, as well as the North Sea coast: the cities of the Hanseatic League, Antwerp, and later Amsterdam.
The spiritual source of capitalism, apparently, became heresies of different confessions, but quite united in their core - and free from the specific restrictions imposed by the Christian worldview and culture. During this period, sects and heresies were actively spreading in Europe: the baton was passed from the Paulicians and Bogomils to the Patarens and Albigensians. These are also Templars who were actively involved in financial activities, the very system of organization of which is an impressive prototype of future TNBs and TNCs.
The Waldensians played a special role in the emergence of capitalism. During the years of persecution that followed the Albigensian wars, the Waldenses were divided, and the radical part, who refused to repent, moved to German-speaking countries, to the Netherlands, Bohemia, Piedmont, to the Western and Southern Alps, where, according to some information, communities that had left state Christianity back in the 4th century. There, in hard-to-reach areas, places of exile, a kind of “European Siberia”, in the harsh conditions of the struggle for survival, the spirit of Protestantism is formed, marked by a special attitude to work, personal asceticism, enthusiasm, self-denial, honesty, scrupulousness, and corporatism.
Former Waldensians are actively introducing themselves into wholesale and retail trade, which allows them to move freely and establish multiple connections. Contact with the Waldensians is attributed to almost all significant figures of pre-Reformation Protestantism: from John Wycliffe to Jan Hus. Expelled from the legal world, forced to live in masks and communicate indirectly, the sectarians discovered that precisely as a result of these circumstances they had serious competitive advantages and were excellently prepared for systemic operations. In other words, they own the mechanism for the successful implementation of collusion and control over the situation, for the development and implementation of complex, highly complex projects, the implementation of large (often collective) capital investments, the informal conclusion of trust agreements that require long-term circulation of funds and active co-presence in different parts of the world.
On this basis, a new type of worldview is spreading in Western Europe, which is characterized by active fatalism, viewing earthly wealth as visible evidence of a calling, and success as a sign of charisma. In medieval Europe, a completely different logic dominated: while labor was compulsory, the opposition of the necessary - necessitas - to the excess - superbia - was emphasized with a corresponding moral assessment, that is, the desire for profit was assessed as a shame and even the very activity of a professional trader as hardly pleasing to God.

1. Main economic issues

Each society, faced with the problem of limited available resources with an unlimited growth of needs, makes its own choice and answers the three main questions of economics in its own way.

What to produce? How to determine priorities in meeting needs, which goods and in what quantity should be produced?

How to produce? How to use available resources most effectively, what resources to attract, how to organize production?

For whom to produce? How to distribute produced goods, who will receive them and on the basis of what principles?

Depending on how society answers the main questions of the economy, certain types of economic systems emerge: traditional, market, centralized.

An economic system is a way of organizing the joint activities of people in society. The concept of an economic system includes such decision-making mechanisms as the legal system, forms of ownership, moral standards, habits, customs accepted in a given society.

2. Types of economic systems

In a traditional economic system, the three main questions of economics (what to produce? how to produce? for whom to produce?) are resolved in accordance with established traditions. Examples of observed traditions in the economy are: customary farming methods, norms of consumption of certain products, religious prohibitions on the production and consumption of specific goods, etc. Sales and purchase relations are poorly developed, agriculture predominates.

Most of the history of human development took place within the framework of the traditional economic system.

O Remember from the course of general history what forms of social

development corresponds to the traditional economic system.

The main incentive for economic activity under the traditional system is the desire to survive. The advantages of this system are predictability and stability. Serious disadvantages include a low standard of living, lack of progress and economic growth.

A centralized system, which is also called a planned, administrative, command system, is characterized by the fact that state ownership is the main form of ownership. Three main issues are decided by central government agencies. These decisions are reflected in state plans and take the form of directives (orders), which are binding on all enterprises. Centralized regulation is carried out not only in the sphere of production of goods, but also in the sphere of their distribution. Such an economic system was implemented in the Soviet Union and, partly, in the countries of the socialist community. The centralized solution of the main economic issues in the USSR made it possible to achieve success in the natural sciences, space exploration, ensure the country's defense capability, create powerful social protection systems, etc.

However, the command-administrative economic system of the USSR turned out to be unable to ensure the development of personal initiative. One of the principles of a command economy is the principle of equal distribution. If an enterprise managed to make a large profit, then almost all of it was confiscated and transferred to the state budget. Workers received almost the same wages; incentives for highly qualified, creative work were insignificant and had not so much a material as a moral basis. All this gave rise to the enterprise’s disinterest in improving production technology, increasing productivity, and the lack of personal interest of people in the results of their work. Gradually, the USSR began to lag behind the leading powers of the world community in the most important socio-economic indicators. The suppression of economic independence of economic entities led to a deterioration in the quality of economic growth and its slowdown. There was a need for radical reform of the economic system.

Market system. In a market system, the role of government is limited. The main subjects of market relations are economically independent participants in economic activity: citizens and firms. Their interaction takes place on the market. A market is any form of contact between sellers and buyers on the basis of which purchase and sale transactions are made. There are many types of markets; they are classified according to the economic purpose of the objects, by geographical location, and by industry.

Markets are in constant interaction, forming a single complex system.

The basis of the market mechanism is individual freedom in making and implementing economic decisions. Freedom of choice in a market economy is enjoyed by entrepreneurs, resource owners and consumers.

Enterprises have the right to purchase factors of production at their own discretion, produce those goods and services that they consider necessary, and choose the method of their production; In this case, decisions are made at your own expense, at your own risk.

Resource owners can use resources at their own discretion. This also applies to the owners of labor resources; they can engage in any type of work that they are capable of.

Consumers can buy the goods and services they want within the limits of their income. In a market economy, the consumer occupies a special position; it is he who decides what the economy should produce; If the consumer does not want to buy goods and services, then the firms will go bankrupt.

The main form of ownership of factors of production is private. Private property assigns to a person the rights to own, use and dispose of economic goods or resources.

Remember from your social studies course what property is.

The main issues of the economy in a competitive environment are resolved on the basis of a system of free prices under the influence of market information.

The question “what to produce?” decided by firms taking into account customer demand.

The question “how to produce?” is decided by firms taking into account the profitability motive, i.e. firms choose the most efficient method of production.

The question “for whom to produce?” is decided in accordance with the solvency of buyers.

The main incentive for enterprises to operate in a market system is profit. The advantages of a market economy are more efficient use of resources, system mobility, its ability to adapt to changes, and the introduction of new technologies. But the market system has a number of shortcomings, so-called market “failures,” which we will consider below.

All types of economic systems can be represented in the form of a diagram.

In real life, all countries have a mixed economic system, which combines the characteristics of other systems: traditional, centralized and market. Depending on their predominance, a mixed economy of traditional, centralized or market type is distinguished.

3. Mixed economic system

In a market economy, problems arise that the market system cannot solve. Such cases of market failure are: inflation, unemployment, the emergence of monopolies, cyclical economic development, uneven distribution of income of citizens.

In a market system, the need to produce public goods also arises. Public goods are economic benefits, the use of which by some members of society does not exclude the possibility of their simultaneous use by other members of society. These include, for example, national defense, fire protection, emergency response (earthquakes, floods), state television and radio broadcasting, etc. Public goods differ from private goods, which have a private seller and a private buyer, in such properties as non-competitiveness, non-excludability and non-profitability. Non-competitiveness means that goods and services can be

used by many people at the same time; at the same time, the amount of goods available to others does not decrease (for example: lighthouse, fireworks). Non-excludability is the impossibility of excluding those who do not pay for them from using these services, the so-called “rabbit effect”, for example national defense or street lighting. Hence the non-profitability of public goods, the unattractiveness of their production for commercial firms (for example: firefighters, emergency rescue services.

Moreover, the market is unable to solve the problem of externalities. Externalities are positive or negative impacts on those who do not participate in the production or consumption of a given good.

Examples of a positive external effect: a free bus to the supermarket - for local residents, a good road to a rich mansion - for everyone who will use this section of the road.

Examples of a negative external effect: environmental pollution by an enterprise, smoking in public places, etc.

Both positive and negative external influences reduce the efficiency of resource use, since in both cases the price of the product is underestimated. At the same time, the quantity of goods sold is artificially low in the case of a positive external effect and unjustifiably inflated in the case of a negative external effect. In the topic of market equilibrium, we will return to this issue and analyze specific situations with externalities.

The presence of market failures necessitates government intervention and the formation of a mixed economic system. In mixed

system, private and public organizations jointly exercise economic control.

Currently, Russia has a mixed market economy.

Three main questions of economics:

What to produce?

How to produce?

For whom to produce?

Depending on how society answers the main questions, a certain type of economic system is formed: traditional, command or market.

The presence of market failures necessitates government intervention and the formation of a mixed system.

Basic Concepts

Economic system Main issues of economics Traditional system Centralized system Market system Market

Private property Mixed system Market failures.

Public goods

External effects

Questions and tasks

1. What is an economic system?

2. Name the three main issues of economics. Why does every society have to deal with these issues?

3. How are the main issues resolved in the traditional system?

4. Which form of ownership is the main one in a centralized system, and which is the main one in a market system?

5. What forces firms to produce quality goods in a market economy? Explain why.

6. Give examples of market failures.

7. What characterizes the modern economy in Russia as an economy of a mixed market type?

8. What are public goods and services? Why don't companies produce them?

9. “Either power or the ruble - there has not been and is no other choice in the economy since the ages, from Adam to the present day.” How do you understand this statement by N. Shmelev?

Humanity has to make choices in the world of economics at every turn. People are forced to constantly seek answers to several main economic questions:
1. What should be produced and in what quantity, i.e. what goods and services should be offered to consumers?
2. How to produce, i.e. which method of producing goods using the limited available resources should be used?
3. How to distribute produced goods and services, i.e. who can claim to receive them as their property?

To answer the first question, people ultimately allocate scarce resources among producers of different goods. Let's say, if we decide to make refrigerators from the metal we have, then the metal will go to enterprises that produce refrigerators, not stoves. And the slabs will not be produced.

When deciding “how to produce,” people choose their preferred methods (technologies) for producing the set of goods that was the answer to the question “what to produce?” For example, Russia's favorite food product, potatoes, can be grown in private plots using mostly manual labor and natural fertilizers. But the same amount of potatoes can be obtained in large agricultural enterprises using powerful agricultural machinery and mineral fertilizers produced by the chemical industry.

Each of the possible technological solutions involves its own combination and scale of use of limited resources (one is more labor-intensive, another is more energy-intensive, the third requires more capital, etc.).

The limited nature of economic resources, as well as the variety of options for their use, determine, on the one hand, the range in which a person, a company or a country as a whole can make decisions, and the economic consequences of implementing the chosen decision, on the other.

To present the problem of choice more clearly, economics uses a special graph called the production possibilities curve. It consists of many points, each of which corresponds to one of the combinations of output volumes of various goods, subject to the full use of the resources available to the country. The more resources a country has, the more each of the goods competing for resources can be produced and the further this curve goes from the origin.

The problem that every company and any country has to solve every day is: what set of goods to produce from the countless possible options available with the available resources and production technology.

For simplicity, let's assume that the country's economy can produce only two types of goods: tanks needed to protect the country from enemies, and trucks for transporting civilian goods. Both types of goods are produced from metal, the resources of which are always, at any given time, limited and known.

We can use all the available metal to produce tanks and then we won’t make a single truck. This option on the graph is indicated by point B. Or, on the contrary, spend all the metal on trucks, stopping all tank factories (point C).

Finally, what is more realistic, we can send part of the metal to tank factories, and part to factories for the production of trucks. Then we will get some combination of the scale of production of both types of products. For example, if most of the metal is used to produce tanks, then we will get a combination that corresponds to point D. By directing most of the metal to the production of trucks, we will get, say, a combination of outputs that corresponds to point H.

In reality, there can be many such combinations of production of alternative types of goods, competitively produced from the same types of resources.

And therefore, choosing the best option is always a difficult task, requiring comparison and weighing of the value of various resources. To solve this problem, economists have developed special, sometimes very sophisticated methods, which are taught in universities and business schools.

Answering the question: “How to distribute the goods produced?” - people, in fact, decide who should get how much benefits in the end. Should everyone get the same amount or not? And if not equally, then to whom how much? And if someone can and should be given more benefits than others, then how much more? And how to carry out such a distribution without causing anger in people due to the injustice of differences in the comfort of life?

Throughout its history, humanity has tried to answer this economic question based on the following principles:
the right of the strong - the best and in greater volume is received by the one who can take away the benefits from the weaker by force of fist or weapon;
the principle of equalization - everyone receives approximately equally, so that “no one is offended”;
the principle of queue - the benefit goes to the one who took a place earlier in the queue of those wishing to receive this benefit.

Life has proven the harmfulness of using these principles, since they undermine people's interest in more productive work. After all, even if you work better than others and get paid more for it, the acquisition of the desired good is not at all guaranteed. Therefore, in the vast majority of countries in the world (and in all the richest countries), a complex mechanism of market distribution prevails today, which is based on the monetary principle of distribution - the good goes to those who are able to pay for it a price that suits the seller.

What, how and for whom to produce? The answers to these three questions must be found by every country and society that wishes to effectively use all the resources at its disposal. The difficulty of making decisions on these issues is associated with objective limitations and the need to make choices: after all, resources are limited and there are opportunity costs. This applies to all societies, regardless of their political system and level of development. The only differences between countries are in the methods of distribution.

Society always strives to effectively use all the resources at its disposal. To do this, he needs to find answers to the questions of what, how and for whom to produce.

• Question “what to produce?” arises due to the fact that resources are limited, there is a possibility of choice and there are opportunity costs. The question of what to produce is fundamental to any society.
• Second question “how to produce?” arises because each country, regardless of what technological level it is at, has at its disposal relatively cheap and relatively expensive resources. For example, India has a labor surplus (so labor is cheap) and a capital shortage (capital is expensive). The United States has relatively cheap capital and expensive labor. Society is always interested in creating the desired set of goods and services at minimal cost.
• Third question “For whom to produce?”, of course, is the most complex because it reflects society's attitudes toward fairness and economic equality. The whole of society must somehow decide what it considers a fair distribution and then choose a way to achieve that distribution. In practice, moving towards equitable distribution may mean a partial abandonment of efficiency. Society must decide how much efficiency it is willing to sacrifice in the name of a more equitable distribution.

The difficulty of making decisions on these issues (what, how and for whom) is associated with objective constraints and the need to make choices. This applies to all societies, regardless of their political system and level of development. The only differences between countries are distribution methods.

Methods of resource allocation in a closed economy

A closed economy is one in which a country does not trade internationally. In the modern world there are no such countries anymore, but the presence of international trade does little to change the logic of resource distribution. We will use a closed economy model to simplify explanations. Let's consider three distribution methods:

1. Distribution in the case where prices are controlled only by the market is a purely market economy.
2. Distribution in the case where prices are influenced by both the market and government decisions - a mixed economy.
3. Distribution in the case where prices are set by the government - command economy,

1. Distribution in a pure market economy. In free markets, decisions about what, how, and for whom to produce are not made consciously by consumers or firms. There is no central authority to set prices or output plans. Both are determined by the interaction of the forces of supply and demand. Firms offer goods and services based on their desire to make a profit, and consumers demand those goods and services in a way that maximizes utility.

Under these conditions, the answer to the question of what to produce follows from those preferences that consumers freely express in the marketplace. Consumers communicate their preferences to producers through money. In the markets, a kind of general voting is held every day, in which consumers cast “votes” of their money for millions of different goods and services.

The solution to the question of how to produce occurs in the course of competition between firms for available factors of production. Depending on prices, firms choose the most profitable combinations of production factors for themselves. A firm can achieve maximum profits by minimizing costs and using the most efficient production methods.

Finally, the decision about who to produce for also takes place in markets. Firms produce for those who are able to pay, i.e. for those who have income. Households receive income by selling factors of production to firms. The distribution of income depends on how factor ownership is distributed and on factor prices. Most families earn income by selling their labor to companies. The sale of factors of production occurs in free factor markets. The sellers in these markets are the people for whom firms produce.

We have considered the case when the price mechanism operates without external intervention, or, in the language of economists, is in perfect conditions.

2. Distribution of resources in a mixed economy. A mixed economy occupies an intermediate position between a purely market economy and a command economy. Most countries in the world live in this economy. It all depends on the extent to which the government is involved in the economy.

The most extensive government intervention occurs in countries that have elected socialist way of development. In them, all factors of production are usually allocated by the government, and consumer goods are released to the market, but market prices are again controlled by the government.

In countries commonly called capitalist, the government also interferes in the economy and thereby puts obstacles in the way of the development of market relations. Government intervention consists of policy restrictions on certain prices and controls on certain industries.

In addition to government intervention, there are other factors in these countries that prevent the market from being in perfect conditions:

• Information costs. In real life, perfect knowledge about the prices of goods and about resources is by no means itself a free product. Significant costs are required to obtain this information and related research. For the average consumer and small business, such costs may be prohibitive. Many consumers lack knowledge about the technical characteristics of complex products (for example, cars, computers, televisions) that are on sale, and sellers are often insufficiently competent in these matters. The same problems exist in the resource market: workers are rarely aware of salary levels and growth prospects at competing firms. For these reasons, decisions to buy goods or sell factors of production are often less than optimal. This is reflected in the distribution of resources.
• The power of monopolies. This refers to the ability of firms to control the prices of their products in the market. In pursuit of maximum profits, monopolies tend to set prices higher than under free competition, and this leads to a redistribution of resources in favor of the monopolies. Controlling the profits of monopolies is one of the reasons why the government intervenes in the price mechanism through legislation and nationalization.
• External factors. The economic activity of any society is accompanied by social costs(pollution, noise) that are not taken into account by firms when determining price levels. The presence of such social costs means that prices do not fully reflect the actual utility that consumers receive. For this reason, consumers do not spend their income in an optimal way, and accordingly, resources are not distributed optimally. In a mixed economy, external factors are regulated by the state through the adoption of laws, the establishment of taxes and subsidies.
• Public goods. The price mechanism, by its very nature, does not apply to public goods such as roads, police, defense. Such goods are consumed by all or most of the population, and their users cannot pay through the price system. In a mixed economy, the state is also involved in solving these problems.

3. Distribution of resources in a command economy. A command economy is an economy in which decisions on production volumes and resource allocation are made by the government. For this purpose, the country usually creates central planning authority (CPO). This body is a large administrative apparatus that develops long-term state plans for economic development and, on their basis, issues directives to enterprise managers on the following issues: a) what to produce; b) where to get resources; c) what production technique to use; d) where to deliver manufactured goods.

Methods of distribution through decisions of the Central Election Commission were used in all socialist countries. Factors of production, living quarters, educational services and even personal income were subject to distribution. As for consumer goods such as food, clothing, and household appliances, there was a market for them, but market prices were regulated by the government.

There are countries in which all resources, including consumer goods and services, are allocated by directive. This is, for example, how economic life is organized in the DPRK.

Advantages and disadvantages of various resource allocation methods

Both the market mechanism and command management have their advantages and disadvantages. Let's consider the main features of each distribution method.

1. Advantages of the market mechanism. In industrialized countries, approximately two-thirds of resources are allocated in markets under the influence of the price mechanism. Let's name the advantages of this distribution method:

• Economic efficiency. Proponents of the market system believe that consumers are the best judges of their own interests. Each of them strives to manage their money in such a way as to get the maximum benefit. Proponents of centralized control believe that the market serves mainly the interests of well-off people, and the economy can be considered effective only when it reflects the interests of all members of society. In their opinion, only at the government level can a study of the interests of the entire population be organized and the optimal allocation of resources be found.
• Greater freedom of choice. In markets, consumers, communicating with producers, convey to them their wishes regarding the characteristics of the goods and services that they would like to purchase. Firms, based on these wishes, create products that, in their opinion, will be in demand. Since there are many companies and they compete with each other, a large number of products for the same purpose appear on the market, but with different capabilities and different workmanship. Consumers have the opportunity to freely choose from a much wider range of goods and services than would be the case in a centrally planned economy.
• Quick response to changes in the economic situation. A market economy reacts faster than a command economy to changing conditions. This is due to the fact that on a company scale, factors such as rising prices for raw materials or fuel, a drop in demand for a product or service, have a much more acute impact on the budget than on a state scale. In addition, the administrative apparatus of the company is disproportionately smaller than the state production center and the time required to make a decision is also disproportionately less.
• Stronger incentives to take risks. Firms' desire to win competition encourages them to make risky investments with the hope of maintaining or expanding their market share. Because firms interact directly with consumers, they usually know their market well, and most of the time their risky investments lead to success. If investments are aimed at developing technology, they will lead to faster economic growth.

2. Disadvantages of the market mechanism. Critics of free markets see a number of shortcomings in them. Let's name the most frequently mentioned of them:

• Income and wealth inequality. It is argued that the price system leads to extreme inequality in income and wealth. By producing goods and services according to the money vote, scarce resources are directed toward producing luxuries for the rich, who have more money votes, rather than toward producing goods for the poor. This opinion has a real basis. An example is the construction of residential buildings in Moscow. Most of the buildings being built are intended for people with a lot of money, and are practically inaccessible to people with below-average incomes. The price system ignores the concept of fairness.
• Unemployment. Some economists believe that the free market mechanism plunges the economy into cyclical unemployment because there is no strict connection between the decisions of producers and the intentions of consumers. Experience shows that in the absence of government intervention, the total demand for goods periodically turns out to be less than the total volume of their production. The result is a buildup of unsold goods, forcing manufacturers to cut production and lay off workers. Low mobility of labor resources does not allow satisfying demand, and reserves remain unused.
• Inflation. During the 1970s and 1980s, most industrialized countries and many less developed countries experienced rapid price increases. This, in turn, caused serious tension in social and political life. The experience of those years prompted many economists to argue that periodic bursts of inflation are an organic property of a market economy. In the case of centralized management, such phenomena can be excluded.
• Contrived demand. In an effort to attract consumers and maintain sales at existing levels or increase them, companies widely use powerful advertising means. The main goal of advertising is to make the consumer want to buy the product. Therefore, advertisers strive to attractively show the benefits that a consumer can get from a product. Sometimes the consumer does not need the advertised product, but under the influence of advertising he buys it. It turns out that the consumer loses his independence in the market.
• Market imperfections. Market prices in some cases do not correspond to the real benefit received by the consumer. They are subject to strong influence from monopolies, do not take into account losses associated with environmental pollution, and often include unreasonably large administrative costs. In the presence of such imperfections, it is hardly possible to meet the conditions for effective economic development.

3. Advantages of a command economy. Some of the distributional disadvantages introduced by the market mechanism disappear when decisions are made by the CPO. There is an opinion that centralized distribution has the following advantages.

• Full employment. The CPO creates conditions for the full use of labor resources. If there are not enough jobs in a certain region, he decides to build a new plant or create a new enterprise, even if the activities of the newly created organizations do not bring profit.
• Low inflation. Since in a command economy the entire range of prices for goods and services is set administratively, the inflation rate can be kept at a lower level than under the price mechanism. If the CPO fails to match supply to demand, shortages are more likely to lead to queues, a black market, and possibly social unrest than to higher prices.
• Minimal loss of resources. In a command economy, the CPO plans for all factories both the production and distribution of finished products, so the manufacturer does not run the risk of wasting resources. State-owned enterprises do not earn profits. All the money they receive from selling products goes back into production. Thus, there are also no losses associated with the formation of profit. Of course, there are always losses caused by CPU errors, but these losses are usually small.
• Greater ability to adapt to external effects. All types of harmful impacts of production and consumption on the environment are under the control of government agencies, and the Center for Educational Inspection includes work to neutralize these impacts in enterprise plans. In cases where it is not possible to neutralize the impact, the CPO, guided by the interests of society, prohibits production.
• Minimal inequality in income and wealth. Since the CPE determines the prices of all factors of production, it is able to minimize inequalities in the distribution of income and wealth. In a command economy, people are unable to accumulate large amounts of capital because all major enterprises are owned by the state. In addition, the state has the ability to set desired standards for housing, health care, and education for all members of society. Usually it strives to ensure that there are no excessively large differences in living conditions.

4. Disadvantages of a command economy. Command economies receive much more criticism from economists than market economies. According to most economists, command economies are fundamentally flawed. It is not carried out by consumers or producers themselves, but by their representatives in government bodies. For this reason, it has a number of serious disadvantages. Let's consider those that are most often cited by critics.

• Information costs. For the work of a centralized production center, a much larger amount of information is needed than for a private company. Information must be collected from the entire country; Highly qualified specialists in commodity research in various industries, economics, statistical data processing, planning and other issues should be involved in the analysis of information. The cost of collecting and processing information is very high. In a market economy, firms only need information that is relevant to their activities, and the bulk of this information comes from the “votes” of money.
• Difficulty in estimating demand. In the absence of free prices, it is extremely difficult to estimate existing and future demand for goods and services. Sometimes demand is estimated by the size of queues for scarce goods or by the number of unsold goods, sometimes by surveying the population, but such estimates are always less accurate than calculating the actual number of purchases on the free market.
• Delays in production planning. In a command economy, after the necessary information is collected and decisions are made, a lot of time is spent drawing up plans for the country's enterprises. During planning, consumer preferences and producers' resource needs can change significantly. As a result, production volumes may not correspond to actual demand and the technology may fall behind.
• Loss of incentives. It is known that in a market economy, the price mechanism generates incentives to develop business and even pushes people to make risky investments. In a command economy, where prices and wages are regulated by the state, these incentives are very weak. Opportunities to increase earnings are low; maintaining existing earnings does not require much effort. Due to these circumstances, the productivity of many workers is low.
• Limited selection of goods and services. In a command economy, there is a tendency towards standardization of products and little regard for individual tastes. The choice of goods and services turns out to be much narrower than in a competitive market. Since the demand for goods and services is formed depending on those products that are available on the market, consumers express their wishes in a very limited range. For this reason, the expansion of the range is slow.

Leonid Evgenievich Strovsky- Doctor of Economic Sciences, Professor, Head of the Department of Management of Foreign Economic Activity of an Enterprise, Faculty of International Relations, Ural Federal University (Ural Federal University)

Any society, no matter how rich or poor it is, grapples with three fundamental questions of economics: what goods and services need to be produced, how and for whom. These three fundamental questions of economics are decisive.

Basic issues of economics.

What goods and services must be produced and in what quantities? An individual can provide himself with the necessary goods and services in various ways: produce them himself, exchange them for other goods, or receive them as a gift. Society as a whole cannot have everything immediately. Because of this, it must decide what it would like to have immediately, what it could wait to get, and what it could refuse altogether. What needs to be produced at the moment: ice cream or shirts? A small number of expensive quality shirts or a lot of cheap ones? Is it necessary to produce fewer consumer goods or is it necessary to produce more industrial goods (machines, machines, equipment, etc.), which will increase production and consumption in the future?

Sometimes the choice can be quite difficult. There are underdeveloped countries that are so poor that the efforts of most of the workforce are spent just to feed and clothe the population. In such countries, in order to raise the living standards of the population, it is necessary to increase production volumes, but this requires the restructuring of the national economy and the modernization of production.

How should goods and services be produced? There are different options for the production of the entire set of goods, as well as each economic good separately. By whom, from what resources, using what technology should they be produced? Through what organization of production? There is far more than one option for building a specific house, school, college, or car. The building can be multi-story or one-story; the car can be assembled on a conveyor belt or manually. Some buildings are built by private individuals, others by the state. The decision to produce cars in one country is made by a government agency,

in the other - private firms.

For whom should the product be produced? Who will be able to benefit from goods and services produced in the country? Since the quantity of goods and services produced is limited, the problem of their distribution arises. To satisfy all needs, it is necessary to understand the mechanism of product distribution. Who should use and benefit from these products and services? Should all members of society receive the same share or not? What should be given priority - intelligence or physical strength? Will the poor and old people have enough to eat or will they be left to the mercy of fate? Solutions to these problems determine the goals of society and the incentives for its development. Basic economic problems are solved differently in different socio-economic systems. For example, in a market economy, all answers to basic economic questions (what, how, for whom) are determined by the market: demand, supply, price, profit, competition.

“What” is decided by effective demand, the vote of money. The consumer decides for himself what he is willing to pay money for. The manufacturer himself will strive to satisfy the desires of the consumer.

“How” is decided by the manufacturer, who strives to make greater profits. Since setting prices does not depend solely on him, to achieve his goal in a competitive environment, the manufacturer must produce and sell as many goods as possible and at a lower price than his competitors.

“For whom” is decided in favor of different groups of consumers, taking into account their income.