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8.1 Classic model of market economy

8.2 Keynes' model

Classic model of market economy

The classical model of a market economy can be considered as a system of interconnected models, each of which reflects the behavior of one of three markets: labor, money, goods.

The model is most suitable for describing an economy with perfect competition. It does not work under monopoly conditions.

This market, like others, is described using three dependencies: the demand function, the supply function and the equilibrium condition. In the classical model, the labor demand function is derived from the following two hypotheses:

1) enterprises (firms) are fully competitive in the presence of supply of goods and hiring of labor;

2) other things being equal, the marginal product of labor decreases with increasing volumes of labor.

From these hypotheses it follows that in a state of equilibrium the marginal product of labor in value terms is equal to the average wage rate (this was discussed in the previous material):

( 8 . 1 )

Where p is the price of the product, is the macroeconomic production function, in which K is the funds, L is the number of employees.

Indeed, if (8.1) were not fulfilled, say, there was bg, then enterprises would try to increase hiring, since with each additional unit of labor they would make a profit, and vice versa - if , then enterprises would suffer losses and try to reduce hiring. With (8.1), that is

From hypotheses 1 and 2, it follows that as the wage rate decreases, the marginal product also decreases until equilibrium is again achieved.

The above is based on conceptual reasoning, but it can also be proven strictly mathematically.

Let us denote profit by P (in this case the economy is considered as one large firm), then, under the assumption that the remaining factors of production, except labor, are fixed quantities, we obtain:

(8.2)

necessary condition for maximum profit:

but because

then, indeed, the second hypothesis is the condition for maximum profit (maximum of the function represented by equation (8.2)). Let us rewrite relation (8.1):

and differentiate it by real wages:

because the

that is As real wages rise, the demand for labor falls.

Labor supply is also a function of real wages.

The postulate is assumed: The higher the real wage, the greater the labor supply.

This hypothesis of the classical theory regarding the labor market is presented in Fig. 8.1, on which is the demand curve, and is the supply curve.

In equilibrium, the real wage is , and employment is .

If real wages exceeded the equilibrium value, that is,

Rice. 8.1. Hypothesis of the classical theory on the labor market

then there would be an excess of supply over demand for labor

therefore, excess supply would lead to a decrease in wages w under the influence of involuntary unemployment, under this condition prices will decrease, but to a lesser extent, therefore, real wages will decrease to . If it turned out that , then the shortage of labor would force entrepreneurs to increase wages, and dynamic equilibrium would again be achieved.

The theory of demand for money (not counting other types of financial assets) in the classical model is based on the hypothesis according to which the total demand for money- this is a function of money income (that is, and where Y is gross domestic product in physical terms, p is price), this function (f) is linear and directly proportional to money income:

where the supply of money is considered as a fixed value, exogenously given. In Fig. 8.2 shows the lines of demand and supply of money. Each Y has its own demand curve.

If at a fixed Y price , then there is an excess supply of money , in this case, the hypothesis is accepted that prices will rise to the level.

Demand for goods (planned spending) is the sum of demand for consumer and investment goods. According to the model as a function of the interest rate, decrease with increasing r.

Rice. 8.2. Money supply and demand chart

Indeed, the larger r, the greater will be the income from savings; therefore, an increasingly larger portion of income will be retained and less (c) spent on consumer goods. By investment ( l), then the more r(i.e., the interest rate used to discount future expenses and income from an investment back to the present), the lower today's estimate of the project's net present value will be.

In the classic model demand for goods is a function of the level of employment, determined in the labor market

The equilibrium condition is that the supply of goods equals the demand for goods

United (general) model.

Combining the equations and conditions describing the market for labor, money and goods, we obtain the classical model in full:

Labor market:

(8.4)

(8.5)

Money market:

(8.7)

Product market:

Each market is defined by supply and demand curves and an equilibrium point. Note that when one of the markets leaves the state of equilibrium, then the remaining markets will also leave this state, and follow to a new state of dynamic equilibrium.

Currently, there are two approaches to determining the achievement of balance between supply and demand. The classical method was outlined at the beginning of the nineteenth century, and it received its development at the end of the nineteenth and beginning of the twentieth century. The second approach was invented by J. Keynes in the first half of the twentieth century. Next, we will take a closer look at the classical economic model.

It should be noted that the term classical economists itself appeared thanks to Karl Marx. He meant, first of all, economists such as Ricardo and Smith. However, later economists included other representatives of the classical school here. Later, the neoclassical school also appeared, which used marginalist analysis as the main one. However, today, for simplicity, these two trends are combined into one.

Classical economic model - basic concepts

Naturally, the basis of the classical model was formed a long time ago. However, it would not be correct to attribute it to history and something that has already outlived its usefulness. Moreover, many of the principles of the Keynesians turned out to be erroneous and there was a return to the classics. This led to the fact that the new classical theory was able to form into a separate direction. As for the foundations of monetarism and the theory of rational expectation, they are also taken from classical theory.

So, the main postulate of the classical economic model is that costs are determined by production. In simpler terms, we can say that products are exchanged for products. This approach was visible in almost all classical economists. J. Keynes attributed all these principles to Say's laws of the market. Jean-Baptiste Say's idea was that commodity is exchanged for commodity. By the way, it was he who considered the idea of ​​barter transactions.

For example, a blacksmith makes horseshoes and exchanges them for bread or milk. That is, the supply of horseshoes by a blacksmith is characterized by his demand for bread or milk. Classics believe that these are the principles inherent in economics. It turns out that demand is always equal to supply. The same can be said about macroeconomics. The income received after the sale of the national product must be such that the demand for it is adequate. In this case, in fact, the market ensures equilibrium in the economy. However, according to the classics, such balance can be shaken during periods of wars, stock market crashes, crop failures, and so on.

During periods of economic turmoil, the market adjusts the economy. With a decrease in production rates and, consequently, an increase in unemployment, inflation, income levels, and interest rates decrease. However, in the future, this will lead to higher consumer spending, employment and investment. At the same time, the existing surplus, whether in goods, labor or investments, is very soon leveled out and again equilibrium is established in the market, as well as in the economy.

Nevertheless, everything looks great just on the surface. As soon as economists subject the theory to deeper analysis, glaring shortcomings surface. If we take into account the fact that economic exchange does not take place within the framework of the product-commodity formula, but with the help of the third component, money, the purchase and sale process is divided into two independent actions, namely sale and purchase. In this case, it cannot be guaranteed that the seller will definitely spend the funds received from sales on new goods for sale. Therefore, if some funds appear that will not be spent in this way, the concept of savings appears in the economy, which will lead to a reduction in production with underemployment.

Classic economic model and interest rate

The classical economic model does not consider money as a means of enrichment. According to the classics, money is only a measure of the price of all goods and a kind of intermediary in the commodity exchange process. The classics believed that money was needed only to purchase goods. That is, according to the classical model, there are only three markets: capital, economic goods, and labor. These markets bring together two market entities - households and entrepreneurs. As a result, it turns out that the entire macroeconomy is divided into two areas - real and monetary.. At the same time, goods and services, labor, and resources for investment are bought and sold on the real market.

Adherents of the classical theory believe that the labor market always reaches equilibrium through wages. That is, if supply begins to exceed demand, payment increases and the market balances. The same thing happens when demand exceeds supply. In this case, the payment decreases and equilibrium is achieved. It should be noted that the followers of the classical theory of the economic model, unlike those who stood at its origins, already recognized money as a means of saving. So, for example, Marshall stated that, despite the fact that people have money, they may not use it to purchase goods.

It should be noted that the above recognition is by no means a denial of Say's theory. It only says that Say's theory will be observed only if the volume of savings is equal to the volume of investment. Thanks to this, it was possible to determine that the capital market equalizes supply and demand using interest rates. For example, if the amount of savings is less than the amount of planned investment, the interest rate becomes higher, which reduces the demand for investment. At the same time, the volume of savings increases. Thus, equilibrium is achieved in the capital market. The classics also believed that equilibrium in the capital and labor markets should lead to equilibrium in the market for economic goods. This means that the income received by the population will be evenly distributed on the market of economic goods, where services and goods are purchased, and on the capital market, where the unclaimed part will be presented as savings. On the other hand, all products produced by enterprises are sold to both households and entrepreneurs, satisfying the investment demand of the latter. Thus, expenses equal income.

As for the money sector, the market here is represented by money. In this market, supply is also balanced by demand. Business entities need money in order to conduct transactions on the market. With the growth of the money supply in economics, households will try purchase additional goods and services or securities with them. Due to the growing demand for securities interest rate will decrease. In turn this will reduce labor supply, since the demand for free time will also increase. As a result, production volume will decrease and this will lead to increased inflation in the economy.

This situation will continue until the cash surplus in the economy is eliminated. Then the interest rate will return to its place. This in turn will lead to the return of equilibrium in the macroeconomy at full employment.

Classical economic model and Keynesianism

The conclusion that can be drawn from all of the above is the following - money does not influence production and is neutral in relation to the real sector of the economy. However, they have an impact on interest rates, price levels, and wages in the economy. Equilibrium is achieved through the interaction of the money market and the commodity market. This balance can be maintained by so-called stabilizers. Moreover, these stabilizers work independently, in autonomous mode. It was this assumption that gave the followers of the classical school the basis to argue that the state should not interfere in economic processes.

In turn, it was this postulate that became one of the disagreements between the Keynesians and the classics. The first, on the contrary, believe that money is not neutral in relation to production. It was the author of the theory of Keynesianism who proved that money can be used as a savings vehicle for an unknown future. In turn, this may result in a decrease in demand for goods and services and ultimately lead to increased unemployment. In this case, the classical theory, which speaks of the neutrality of money in relation to the real sector, does not stand up to criticism.

Keynes also believed that in the modern world the state must intervene in economic processes in order to establish equilibrium. At the same time, the state must use various tools that it has in its hands to achieve its goals. Thus, Keynes contrasted his theory with the classics, who believed that the state should not interfere in economic processes.

At the end of the 19th century, three directions emerged in the classical school: Austrian (representatives were Menger, Wieser and Boehm Bawerk), Lausanne (Pareto and Walras), and American (Clark and Marshall). The greatest contribution was made by the American school, whose follower Marshall made one very important discovery, namely, supply and demand determine the price equilibrium in the market. In the Marshall model, supply and demand are the very “blades of the scissors” that cut the equilibrium price. At the same time, buyers are guided by the marginal utility of goods and services, and sellers, when making an offer, are guided by marginal costs and losses.

It was thanks to the famous American economist that such a concept as elasticity of demand appeared in economic theory. With this concept, Marshall described the impact of price changes on demand. At the same time, he identified various time periods within which forces operated that sought to establish equilibrium. These periods include: momentary or instantaneous, short-term, long-term and very long-term. It should be noted that the time factor had a strong influence on subsequent generations of economists who dealt with issues of market equilibrium.

Ultimately, it was Marshall who gave the formulation of a new method of organizing the economy. He said that its development should take place regardless of political influence and regardless of state policy. That is, the economy must be outside the state. One of his best students, Keynes, subsequently criticized this approach and created his own theory, which, in his opinion, was more consistent with that historical period.

Neoclassical theory

Another American economist, J. Clark, made a great contribution to the development of classical theory. This economist is sometimes called marginalist from America. It was he himself who developed the theory of marginal productivity and the use of this theory in the study of the distribution of goods. According to this economist, in the state all benefits are distributed in kind.

The income that the company receives per year is divided into three parts. This includes wages, interest, and total earnings. We can say that neoclassical theory studies the formation of prices for services and goods in competitive markets.

Monetarism

In the second half of the twentieth century, neoclassical theory began to acquire its modern features. One of the innovations of this theory was monetarism. According to this theory The supply of money in the economy influences the price level, as well as the volume of production in the state. It should be noted that neoclassicists still did not deny the role of the state in stabilization measures in the economy.

The theory of monetarism became very popular especially in the seventies and eighties of the last century. This became possible because Keynesianism was defeated. The main problem that economists faced during that period was growing inflation. In such a situation, there was a strong need to establish equilibrium in the economy. Monetarists conducted a number of studies in which they found that the volume of the money supply can influence aggregate demand, as well as the price level. It was the monetarists who showed that money is also a commodity. At the same time, money, as a commodity, can replace other goods and assets. Thus, it became clear that money can play a stabilizing role in the economy.

In the course of their research, followers of monetarism also found out that there is a close connection between the rate of GDP growth and the volume of money supply in the economy. An increase or, conversely, a decrease in the money supply leads to changes in the employment market, the development of business activity and cyclical fluctuations. It is also very important to note that monetarism is interested in the role of expectations and the dynamics. The point is that a person behaves quite rationally and their expectations are formed on the basis of monetary interest. That is, for example, shareholders can sell assets if they expect their prices to fall. For currency speculators, we can give the following example. On the eve of the publication of information on the interest rate, information appears that it will be reduced. Traders assume that the currency will become cheaper and begin to sell it.

Essentially, such assumptions can cause demand or supply to increase. This affects the formation of the cost of goods or services. Moreover, such formation occurs even before the events. In markets this phenomenon is called market expectations. Many traders have seen how, on the eve of the publication of important macroeconomic statistics, when the forecast is known in advance, the markets begin to “work out” this forecast. Therefore, we can conclude that people are generally rational in their actions and do not make erroneous conclusions. This, in turn, proves that in the short term, government intervention in issues of regulation and stabilization of the economy is pointless.

Supply theory

In the previous part of the article, we examined the attempts of monetarists to prove the futility of the state's attempts to stabilize the economy in the short term. Another example is where the central bank implements a cheap money policy to stimulate production and employment growth. In this case, citizens, based on their previous experience, will begin to take protective actions, knowing that with such a policy an increase in inflation is expected. Employees may demand higher wages, companies may increase the cost of their products, and the like. As a result, such a policy may cause an effect in which real output remains unchanged and inflation rises significantly.

In the seventies of the last century, a new movement appeared that studied the theory of supply. The founders of this movement include Feldstein, Regan, and Laffer. The works of these economists are fully consistent with the spirit of liberalism in economics. This trend completely opposes the teachings of Keynes and not only denies the need for state intervention in the issue of stabilizing the economy, but also suggests that supply is one of the most important factors of economic growth. In order to put the theory of supply into practice, followers propose tax cuts as well as increased competition in the sales and labor markets as measures.

Classic economic model - conclusions

From all of the above, it is clear that the classical economic model today is not only not consigned to oblivion, but is also widely used as part of modern research in the field of economics. However, the classical model was constantly criticized (for example, by the same Keynes) and continues to be seriously criticized at the present time. Indeed, for the most part, its postulates are based on hypotheses that are very, very limited and easily “fall apart.” First of all, this concerns the problems of restoring balance. Indeed, in a real situation, with full use of resources, balance will not be restored automatically, much less instantly. Moreover, in modern conditions, the mobility of some factors is constrained by the structure of the economy, and control over markets is often in the hands of oligarchs and monopolists.

It should be noted that the function of regulating the economy through prices is also untenable due to the fact that companies can make erroneous conclusions regarding demand, especially when it comes to areas where long-term investments prevail.

As a result, it turns out that the mechanism for regulating and stabilizing the economy through market instruments is quite weak and cannot meet all the challenges of the future. In addition, the issues of aggregate demand, supply, as well as the use of all possible resources are rather utopian, because in real life this is impossible.

Finally, although prices can have a significant impact on economic growth in the long term, they cannot fulfill their functions in the short term, since interest rates, wage growth, and prices of goods and services are slow-moving factors. and cannot be used to perform a regulatory function.

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Questions:

Market concepts and its development.

Competition and its types.

Market structure and infrastructure.

Market failures and the need for government regulation.

Market models.

First question.

Under market is understood in a general sense as the place where the buyer and seller meet to carry out the act of purchase and sale.

In fact, market is not limited only to geography, that is, location, that is market more a process, a set of relationships formed under the influence of supply and demand.

The market formation took place in three stages:

1. Production

2. The emergence of the economy.

3. The emergence of market relations.

First stage associated with the existence of a subsistence economy, that is, when products were produced only for one’s own consumption. In this case we are talking about a closed management system.

Second phase. Subsequently, relations went beyond self-consumption, after which the emergence of a commodity economy followed, that is, the exchange of products appeared. The final formation of the economic stage of the market was facilitated by the social division of labor, that is, specialization for the production of certain products appeared.

Third stage. The market economy arose with the emergence of market institutions and the development of its infrastructure. For example: the emergence of fairs, exchanges, the development of trade and intermediary networks.

The market as a phenomenon and mechanism performs the following: functions:

1. Information. The idea is that the main signals in the market are prices, based on which consumers and producers make decisions about buying and selling goods, respectively.

2. Coordination of economic relations. In the market there is interaction between sellers and buyers, based on this there is a cessation of production of some goods and an increase in others.

3. Stimulating. Based on market signals, namely prices, tastes and preferences of consumers, the manufacturer makes decisions about what, how and for whom to produce.

4. Sanitation. The point is that, as a result of fierce competition, the strongest remain in the market.

Second question.

In a general sense, under competition understands the struggle between producers for buyers and economic resources, and also understands the struggle between consumers for goods in the event of a shortage.

In economic theory, under competition understands the degree of influence of the manufacturer on the price of the product. Accordingly, the higher this influence, the lower the competition.

Based on this, four market structures:

1. Perfect competition

2. Monopolistic competition

3. Oligopoly

4. Monopoly

By degree of competition market structures can be arranged as follows:

Figure 6

Perfect competition- a market where many sellers sell homogeneous, absolutely identical goods, the output of firms in this market is extremely small, the price is the same for everyone, based on this, the manufacturer cannot influence the price of the product. This type of market is more theoretical than practical - it is a model. A model for understanding the market mechanism. Exceptions: agricultural market and securities market).

Monopolistic competition- a market where there are many sellers selling differentiated goods. Barriers to entry into the market are insignificant. The impact on the seller's price is also negligible. Non-price competition methods are used to distinguish one product from another. This type of market is typical for most consumer goods (chocolate, refrigerators, etc.).

Oligopoly- a market where several sellers operate, producing homogeneous or differentiated goods. Entering such a market is difficult - and mainly conditional competition methods are used for this, namely, one seller must take into account the behavior of another seller. Prices in such a market are formed either based on the price of the leader, or by lowering the price to a minimum level in order to make the market competitive, which cannot reduce prices to such a level (mobile communications, aviation, shipbuilding).

Monopoly- a market where there is one seller who independently sets the price for the product. Entering such a market is impossible. The product is unique, that is, it has no substitutes, since the production of such a product is impractical or unprofitable (railway, water utility, Beltelecom, power plants, gas industry).

Table 1

Third question.

Currently, in economic theory there are four main macroeconomic subject:

1. Households

2. Firms (business sector)

3. State

4. Abroad

Household– all private economic units (individual, family, group). The primary goal of a household is to maximize utility while satisfying a need. The household is the owner of economic resources (labor, land, capital, entrepreneurial ability). In addition, it is the main consumer of goods and services. Can act as both a saver and a borrower. It is the largest macroeconomic agent.

Firm– a set of entities engaged in economic activities. The main goal of firms is to maximize profits. It is the main buyer of economic resources, for which it pays factor income to the household. In addition, it is the main producer of goods and services; it can act as a lender when a company buys shares of another company, and can act as a borrower when funds are raised for investment.

State– a set of institutions that have the legal and political right to influence economic processes. The state is a producer of public goods. In addition, it is a buyer of goods and services to provide the public sector. In addition, it deals with the redistribution of income through the tax system. Can be a lender and a borrower. By the creditor - in case of budget surplus (income > expenses). By the borrower - in case of budget deficit (expenses > income). In essence, the state sets the rules of the “game” of the economy.

Abroad– the totality of all non-residents of an economy having trade relations with it through exports and imports.

In addition to macroeconomic agents, there are also macroeconomic markets, namely:

1. Market of goods and services

2. Financial market

3. Resource market

4. Foreign exchange market

Market of goods and services– a market where all macroeconomic entities interact.

In the financial market there is a purchase and sale of monetary assets, that is, the interaction of demand and supply of money ( money market) and the interaction of supply and demand for securities ( stocks and bods market).

On resource market there is a purchase and sale of economic resources, and the formation of factor income.

On currency market There is an exchange of currencies and the establishment of exchange rates.

Graphically, the interaction between the main actors and markets can be represented as follows:

Figure 7

There is also abroad, which gives imports to the goods market and receives goods and services. Financial market, which gives interest to households and receives savings, and the financial market also gives loans to firms and receives interest on loans.

Market infrastructure– a set of institutions that ensure the functioning of the market. Such institutions include exchanges, fairs, auctions, trading houses, chambers of commerce and industry, holdings, and brokerage houses.

Fourth question.

Currently, in a market economy there are situations that the market cannot cope with on its own. These phenomena are called market fiasco or market failures. Some of these failures include the following:

1. Presence of external effects. The impact of production on society as a whole. There are negative externalities and positive externalities:

a. Negative- environmental pollution.

b. Positive– the spread of higher education, which makes it possible to increase the well-being of a person who does not receive it at all.

2. Lack of public goods on the market. The producer of public goods is the state. From a market point of view, the production of such goods is unprofitable.

3. The emergence of monopolies in the market, which reduces competition, degrades product quality and leads to discrimination. Thus, the state must pursue an antimonopoly policy, that is, stimulating competition and establishing an upper price limit.

4. Information asymmetry. The fact is that the transaction is most successful if both the seller and the buyer have the same information about the product. However, as a rule, the seller knows more about the product. The task of the state is to disseminate information about goods (social videos about goods, requirements to indicate the composition on product labels, production requirements according to technical specifications).

5. Presence of transaction costs. Costs associated with concluding contracts, that is, costs of searching for goods, paying for them, and so on. The role of the state is to develop the market infrastructure through the development of the banking system, plastic cards, electronic transfers, permission of electronic signatures - everything that simplifies trade and exchange transactions.

6. Lack of social efficiency. Ensuring social efficiency on the part of the state lies in the policy of income redistribution aimed at reducing their differentiation.

7. The need to regulate consumption patterns. It consists in the fact that the production of some goods is recognized as a priority in a particular country, while the production of other goods is prohibited or limited.

Definitions that were not given in the lecture:

Subjects– participants in market relations (households, firms, government, abroad).

Objects– goods and services or factors of production (labor, land, money, securities).

Auction– public auction.

Fair– a regular, periodically organized market that operates at a set time and place.

Exchange– wholesale trade market (goods, currency, securities):

1. Commodity exchanges

2. Specialized exchanges

3. Universal exchanges

4. Stock exchanges – securities (bonds) markets. The sale is carried out on the basis of an auction.

Hedging– insurance against losses due to possible sudden price changes.

Economic methods– involve the formation of general business conditions and the economic interest of an economic entity in carrying out certain actions. Economic methods are divided:

1. Direct impact measure

2. Measure of indirect impact

Direct impact measure– targeted financing, public procurement system

Measure of indirect impact- monetary and fiscal.

Production of goods and services – real sector of the economy.

Market power– a value showing the degree of influence of the seller on the entire market.

Market model– model of development of a market economy. There are several models of market economies:

1. Liberal market model. This model is typical for the USA and has the following features:

a. Unconditional priority of private property

b. Strong competition

c. Flexible labor and product markets

d. Minor government regulation

e. Relatively low taxes

f. Shareholder capitalism, stimulating the extraction of maximum profits

g. Strong social differentiation

2. Social market model. This model is typical for European countries and has the following features:

a. Supporting a competitive environment that prevents the emergence of monopolies

b. Liberalization of prices and legislative implementation of state non-interference in pricing mechanisms.

c. Carrying out an “open economy” policy

d. Legislative registration of effective forms of ownership, transition to a variety of forms of ownership and management

e. Freedom to enter into contracts as a prerequisite for competition

3. Model of Scandinavian socialism. It is typical for the countries of Northern Europe, primarily Sweden, and has the following characteristics:

a. The national economy is based on private property

b. Significant government intervention in the functioning of the market

c. Quite low social differentiation, ensured by high taxes and social benefits

d. Very low level of corruption

4. Japanese market model:

a. Private property is fundamental

b. The role of the state is extremely insignificant

c. The state is interested in both the competition of economic entities and their cooperation.

d. There is a system " work for life"when an employee is hired by the enterprise once and for all

e. During economic downturns (reduction in production levels), no one quits their jobs, but everyone’s wages are reduced

f. Commitment to long-term sustainable development

5. Economy of newly industrialized countries. Countries that were previously part of developing countries with significant rates of growth and economic development. Main features:

a. Development based on market principles

b. Varying levels of government intervention

c. Dependence on foreign investment and international trade

6. Chinese model. It should be said that this type of economy is mixed, and therefore cannot be classified as a market model entirely based on market principles. It is characterized by the following features:

a. Rapid influx of foreign investment

b. Development of private property and market relations

c. The state regulates most economic processes

d. Significant regional differentiation

7. Economy of socialist countries(transition economy), which is characterized by:

a. Non-market nature of the economy

b. Policy " shock therapy"(denationalization, deregulation of the economy and privatization).

c. Policy evolutionary reforms(a longer development path relative to the “shock therapy” policy).

8. Belarusian economic model, where the following characteristic features stand out:

a. Processes of denationalization and privatization.

b. Mixed pricing system, where prices are regulated by both the state and market principles

c. Partial system for planning further paths of economic development

d. Gradual liberalization of income distribution.

e. Little population differentiation and greater social stability

Macroeconomics.

Introduction……………………………………………………. 3

1. Concept and essence of economic systems…………… 6

1.1 Economy as a system…………………………………… 6

1.2 Differences in economic systems………………………… 8

2. Types of economic systems……………………………. 12

2.1 Traditional economic system………………….. 12

2.2 Administrative-command economic system... 13

2.3 Market economy of free competition………… 15

2.4 Modern market economy……………………… 17

2.5 Mixed economy…………………………………… 20

3 .WITH modern models of market economy………….. 22

3.1American model …………………………………….. 22

3.2 Swedish model…………………………………………. 24

3.3 German model……………………………………. 26

3.4 Chinese model…………………………………………………….. 27

3.5 Japanese model…………………………………………… 29

3.6 South Korean model………………………………… 32

3.7 Russian model of a transition economy…………… 33

Conclusion……………………………………………………………… 38

References……………………………………………………41

Applications……………………………………………………………. 43

INTRODUCTION

The relevance of the chosen topic is due to the fact that in recent years economic reforms have begun to be implemented in our country related to the transition to market relations, demonopolization of the economy, privatization and denationalization of property.

Let's start with the fact that the behavior of the state, both in the world and in the domestic arena, depends on the type of economic system. Without the systemic nature of the economy, economic relations and institutions could not be constantly renewed, economic patterns could not exist, a theoretical understanding of economic phenomena and processes could not develop, and there could be no coordinated and effective economic policy.

Real practice constantly confirms the systemic nature of the economy. Objectively existing economic systems are scientifically reflected in theoretical (scientific) economic systems.

As the history of economic science shows, classification of economic systems can be made on the basis of various criteria. This multiplicity is based on the objective diversity of properties of economic systems. Modern economic theory courses typically differentiate between market, traditional, command, and mixed economies. The best studied is the market economy, which is characterized as a system based on private property, freedom of choice and competition, based on personal interests, and limits the role of government.

The modern model of market economics, which has developed in countries with highly and moderately developed market economies, is a complex economic system of social relationships in the sphere of economic reproduction, determined by several principles that determine its essence and distinguish it from other economic systems and is characterized by the following number of general patterns:

Market openness;

High level of development of the country’s economy as a whole and market infrastructure;

A developed system of methods for regulating the national economy; - the economic growth.

Thus, the topic of the course work is of great relevance today, since today Russia is in the process of transition to market relations. It is in the zone of instability because a specific option for further development has not been determined. This is due to the problem of choosing an economic model. It is still relatively easy to direct development along one path or another. But in the future, changing the chosen direction of development becomes very difficult.

Our country has several options for shaping its economy. Theoretically, it is possible to choose between national models of economic organization that have already proven themselves in practice. But the successful use of world experience in the domestic economy must take into account differences in the current level of the productive base and national flavor. The need for further market reforms, the traditionally high role of the state, the strengthening of social principles in the modern economy, the impossibility and undesirability of a return to the total dominance of the state in the economy, narrow the theoretically wide choice to a model of a social market economy. Therefore, the fateful significance of the historical moment Russia is experiencing is not loud words, but the essence of the modern situation. The main goal of the course work is the need to understand the conditions for the development of a market economy using the example of countries whose economies have distinctive features, and to explore the measures taken by these countries for further economic prosperity.

The course work has a number of tasks:

– identify the concept and essence of economic systems;

– identify the main types of economic systems;

– establish the basic models of a market economy.

We will consider these and other questions in this work using the examples of the USA, Japan, Germany, China, South Korea, and Russia.

1. CONCEPT AND ESSENCE OF ECONOMIC SYSTEMS

1.1 Economy as a system

The first detailed analysis of the economy as a system was given by the founder of the classical school of political economy A. Smith in his main scientific work “An Inquiry into the Nature and Causes of the Wealth of Nations” (in the accepted abbreviation “The Wealth of Nations”), published in 1776. Of the subsequent scientific economic systems, we should first of all highlight the systems created by D. Ricardo (1817), F. List (1841), K-Marx (1867), K. Menger (1871), A. Marshall ( 1890), J. Keynes (1936), P. Samuelson (1951).

Of the domestic economists of the past who emphasized a systematic view of the economy, it should be noted I.T. Pososhkova, A.I. Butovsky, N.G. Chernyshevsky, M.I. Tugan-Baranovsky, P.B. Struve, V.I. Lenina, N.D. Kondratieva.

In the Soviet period of domestic economic science, the most noticeable were the theoretical systems reflected in the textbooks of political economy edited by K.V. Ostrovityanova, A.M. Rumyantseva, N.A. Tsagolova, N.P. Fedorenko, V.A. Medvedeva, L.I. Abalkina.

The economies of different countries, along with common features, have differences, sometimes quite significant. Most often, such differences are caused by the scale and levels of development, the specifics of the sectoral structure of the economy, which depends on natural resources. Historical features also have an impact. However, the main difference between economies lies in the principles of organization of reproductive processes. The structure of economic life in a country follows from how the government and people of the country answer the three main questions of economic science: “What, how and for whom to produce?”

Depending on how the economy operates and is managed, there are different types of economic systems. In addition, any economic system bears the imprint of the dominant political system and state ideology in the country.

The economy of any country functions as an independent large system. And each link of this system can exist only because it receives something from other links, i.e. is in relationship and interdependence with them.

Thus, an economic system is a specially ordered system of connections between producers and consumers of material and intangible goods and services.

The versatility of the economic system allows it to be defined in different ways: it is a set of mechanisms and institutions relating to production and income; these are the institutions of the organization; laws and regulations, traditions, beliefs regarding economic behavior, etc.

An economic system stands out from other types of systems (for example, technical) by its specific features: production, exchange and distribution of goods in society, bringing them to the final consumer. There is not a single person who does not participate in this process. This participation can be direct or indirect. For example, pensioners are involved in the functions of the economic system by providing their savings either to banks, investing money in them, or to joint-stock companies, purchasing their shares and bonds. Almost the entire working population either serves in government agencies, or has their own business, or is employed, and sometimes combines some of these activities. Thus, the same people act both as producers and consumers of goods created within the economic system.

An economic system is a set of economic phenomena and processes occurring in society on the basis of property relations and organizational and legal forms of management operating in it.

An economic phenomenon is the activity of economic subjects or agents. These include households, individual entrepreneurs, managers of banks, firms, associations, unions, government bodies and institutions.

The position and role of each economic agent are determined by its relationship to the resources (factors) of production. Some have capital and have economic power, determine the forms of management, and participate in the management of business activities. Others control only their own labor force, and their ability to influence the organization of production, distribution of income, and participation in management is limited.

An economic phenomenon in dynamics (development) is an economic process. The cause-and-effect relationships that arise between economic phenomena in the process of their development are called the economic mechanism. They are used by an economic entity to achieve positive results of economic activity. Economic activity is the production of various vital goods and services, which is the basis for the existence of each person and the entire society as a whole.

The classical model of a market economy can be viewed as a system of interconnected models, each of which expresses the behavior of one of three markets: labor, money and goods.

The model is most suitable for describing an economy with perfect competition. It does not work under monopoly conditions.

Labor market. This market, like others, is described using three dependencies: the demand function, the supply function and equilibrium conditions. IN classical model, the labor demand function is derived from two hypotheses:

• 1) Firms are fully competitive in offering labor-hiring goods.;
• 2) other things being equal, the marginal product of labor decreases as the labor force grows.

From these hypotheses it follows that in a state of equilibrium the marginal product of labor in value terms is equal to the wage rate w:

Where R- product price; F = F (.TO, L) is the production function, while TO- funds, L- number of employees.

In fact, if this were not so, say, then

firms would try to increase hiring, since with each additional unit of labor they would make a profit, if

’, then firms incur losses, so they try to reduce

From relation (2.12), and therefore from hypotheses 1 and 2, it follows that when the wage rate falls, the marginal product will also fall until equilibrium is reached again.

What is stated above in the form of conceptual reasoning can also be proven strictly mathematically.

Let us denote by P - profit, then, assuming that all factors of production, except labor, are fixed, we obtain the assumption

The necessary condition for maximum profit has the form , but since

then, indeed, condition (2.12) is a condition for maximum profit. Let us rewrite relation (2.12) in the following form: and

Let's differentiate it by real wages:

Because the , i.e., as real wages rise, the demand for labor falls.

Labor supply is also a function of real wages. The postulate is accepted: the higher the real wage, the greater the supply of labor.

These hypotheses of the classical theory of the labor market are presented in Fig. 2.13, on which L°- demand curve, L s- supply curve.

Rice. 2.13

In equilibrium, the real wage is (w/p), and employment - L 0 .

If real wages exceeded the equilibrium value, i.e., then there would be an excess of supply over

demand for labor , therefore redundant

the proposal would cause wages to fall w under the influence of forced unemployment, while prices R will fall, but to a lesser extent so that real wages will fall to

If it turned out that , then the lack of labor

would force entrepreneurs to increase wages and dynamic equilibrium would be achieved again.

Money market. The theory of demand for money (without other financial assets) in the classical model is based on the hypothesis that aggregate demand for money is a function of money income (i.e., a function of Yp, Where Y- gross domestic product in physical terms), and directly proportional to monetary income:

The supply of money is considered as a fixed, exogenously given value. In Fig. Figure 2.14 shows the demand and supply curves for money. For each Y- its own demand curve.

Rice. 2.14

If given Y price r then there is an excess supply of money M s - M D (p), in this case it is postulated that prices will increase to the level p°.

Market of goods. Demand for goods(planned expenses) - is the sum of demand for consumer and investment goods E = WITH + I, according to the model WITH = WITH(G), 1 = 1 (g), and C (g), I (G) as a function of the interest rate G decrease with growth G.

In fact, the larger r, the greater the income from savings, therefore, an increasingly larger part of the income will be saved and a smaller and smaller portion will be spent on consumer goods. If we are talking about investments, then the higher G(i.e., the interest rate used to discount future investment costs back to the present), the lower today's valuation of any given investment project will be. Projects that make a profit at low interest rates become unprofitable at higher rates and will be rejected by an investor seeking greater profits.

In the classical model, the supply of goods is a function of the level of employment determined in the labor market.

The equilibrium condition is that the supply of goods equals the demand for goods E = Y.

Combining the equations and conditions that define the markets for labor, money and goods, we obtain the classical model in full:

Labor market:

Money market:

Product market:

Thus, each market is defined by supply and demand curves and an equilibrium point. It is enough for one of the markets to leave the state of equilibrium, and all markets will leave this state and then will strive for some new state of dynamic equilibrium.

Job Keynes The General Theory of Employment, Interest and Money was published in 1936 as a response to the problems arising from the crisis of overproduction and mass unemployment during the Great Depression in the West in 1929-1933. The classical model discussed above provided an answer to the problem of finding equilibrium in the economy under conditions of full employment. But how to achieve equilibrium if, under a certain set of circumstances, the economy has moved far from the equilibrium state and is characterized by mass unemployment?

Keynes saw his task as showing that equilibrium at full employment is not a general case. The general case is equilibrium in the presence of unemployment, and full employment is only a special case. To achieve the desired state of full employment, the state is obliged to pursue special policies to achieve it, since automatically operating market forces without this support do not guarantee its achievement.

We assume that there is a money market that is different from the bond market. In total, three types of assets are considered: money, bonds, physical capital. The relative price of money expressed in terms of bonds is the interest rate on the bonds. It is assumed that in equilibrium the rate of return on physical capital (i.e., on the available stock of investment goods) is equal to the rate of return on bonds.

Thus, another difference of the model is the ability to trace how monetary policy affects production. For example, increasing the money supply by printing new money changes the proportions of exchange between money and bonds. If there is more money, they will be stored only if the interest rate on bonds (an alternative type of asset) decreases, while the rate of profit should also decrease, since bonds and capital are close objects.

Let us now consider the criterion for maximum profit in relation to capital (funds) at a fixed level of employment. Profit P = pF (K, L) - g K, Therefore, the necessary condition for an extremum is:

d 2 P .

because the 0, then, indeed, we obtain the maximum condition:

Thus, the marginal productivity of funds in value terms is equal to the amount of profit (interest rate).

Thus, a fall in the rate of profit according to (2.15) means a fall in the marginal product of capital, and since the marginal product falls with growth TO, then a fall in the rate of profit necessarily implies an increase in the demand for investment goods, and therefore for goods in general. So, having traced the entire cause-and-effect chain, we see that a relatively small increase in the money supply leads to an increase in demand for goods, respectively, to an increase in the supply of goods, i.e. to an increase in the final product.

Let's take a closer look at the labor market in Keynes's model. Let us recall that in the classical model equilibrium occurred at full employment and the equilibrium value of real wage

fees were determined from the condition

in this case the equilibrium final product Where

L 0- number of workers at full employment.

Let us now assume that, for certain reasons, demand E(for products) turned out to be less than supply Y 0 at full employment.

In this case, as Keynes believed, the final product actually produced Y will be equal to demand This will have an immediate impact on the labor market since, other things being equal, less output can be produced by fewer workers, i.e. L Thus, if in the classical model real wages ( w/p)° determined

number of employees , then in Keynes’s model the demand for goods E

determines the level of employment L, wherein L - L 0 and there is the level of unemployment that is dictated by the markets for money and goods.

The mystery here is that producers cannot sell as much as they would like, they produce and sell only according to demand. Therefore, the labor demand curve, which was derived under the assumption of profit maximization, cannot be applied.

Let's summarize. The main innovations of the Keynes model compared to the classical one are as follows:

• 1. Equilibrium in the goods market is achieved when planned demand and actual supply are equal.
• 2. The actual demand for labor is determined by the product actually demanded, and, therefore, equilibrium in the labor market can be achieved when the market for goods is in equilibrium.

In general, Keynes’ model is written as follows: ( Lq(r) - demand for bonds depending on the interest rate):

Labor market:

Money market:

Product market:

Let us consider the equilibrium in the goods market under the assumption that the dependences C(Y)> K d)- linear, i.e. the demand for consumer goods grows linearly with the increase in the supply of goods: A>0.0 b . Then the equilibrium condition (2.17) will be written in the following form:

i.e., the equilibrium curve in the goods market (curve IS) is a linearly decreasing function of r, and, therefore, for a fixed value of r there is a unique equilibrium value of V° (G).

Let us now consider the equilibrium in the money market under the assumption that the demand for bonds Lq(r) linearThe equilibrium condition (2.16) will be written in the form

That is, the equilibrium curve in the money market (curve LM) is an increasing linear function of r, therefore, for fixed r there is a single equilibrium value (r).

General equilibrium in the markets for money and goods is achieved when and the equilibrium point (T 0, r 0) (the point of intersection of the curves IS And LM) the only one. The aggregate equilibrium in the markets for money and goods clearly determines the actual need for labor:

The general picture of establishing equilibrium is shown in Fig. 2.15.

The first quadrant shows the curves IS, LM, in the fourth quadrant - the production function of the PF economy as a function L, in the third quadrant - labor supply and demand curves. As we see, the causal connections are directed from the goods and money markets to the labor market through the PF, and the labor market is not decisive.

Rice. 2.15

If the classical model assumes an automatic tendency towards full employment, then in Keynes’ model there is no such thing. Indeed, let equilibrium be established at L Then in order to achieve full employment L°, it is necessary to increase production output to Y 0 = F (K,L°), which would require shifting the curve L.M. to position LM 0 . As can be seen from (2.18), such a shift can be ensured with an exogenously given position of money and fixed coefficients k, h only by reducing prices p, but no mechanism for reducing prices at a fixed wage rate w 0 is included in Keynes’ model. Therefore, special government policies are needed to transition to full employment.

If the curve L° is nonlinear and at the same time has a horizontal section, then a liquid trap arises. With the indicated shape of the curve, there is equilibrium in the financial market, regardless of the fall in prices associated with the excess supply of goods and labor.

And one more feature: the level of planned expenses E can be so high that production Y cannot reach this level. This happens when the point of intersection of the curves IS And L.M. has a negative interest rate.

A correction of Keynes's approach is the monetarist analysis of the economy, developed in the 70s. XX century M. Friedman. The essence of the difference in the approaches of Keynes and Friedman is as follows. Keynes believed that the most significant influence on the movement of basic macroeconomic indicators is the demand for goods, while, according to Friedman, the main thing is control over the supply of money.

Monetarists believe that speculative demand for money does not depend on the interest rate, therefore an increase in the supply of money leads to an increase in prices, but not production volumes, as would follow from Keynes's model. Monetarists believe that monetary policy cannot affect real output and unemployment in the long run, although it can in the short run.

As our experience and the experience of other countries testify, sometimes Keynes’s approach was justified, sometimes Friedman’s approach: with low and state-controlled inflation, the Keynesian approach works; with hyperinflation and weak state control - a monetarist approach.