Comparative Econ Midterm -1

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Economy seeking to use modern technology and relate to the modern world economy while attempting to reembed the economy in a traditional social structure, usually determined by a religion.
Iran an example.

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New Traditional Economy

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Idea of Martin Weitzman about profit sharing in modern economies. Some argue that Japan is
a share economy.

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Share Economy

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An economy whose practices derive from being embedded within a sociocultural context, usually a traditional religion. Old and New varieties have different approaches to modern technology,
education, and global economic integration.

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Traditional Economy

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Hindu socioeconomic system wherein people work at the jobs that their parents held. Although officially illegal, still largely dominant in rural India and based on ideas of reincarnation and karma. People deserve their social status because of their behavior in past lives and can only marry someone from their caste.

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Caste System

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Economy whose allocation decisions are determined by market forces of supply and demand.

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Market Economy

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State direction of allocative decision making in the economy through commands.

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Command economy

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Economic system with predominantly private ownership of the means of production.

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Capitalism

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State ownership of the means of production, although political socialism has evolved that does not call for this (e.g., social democracy).

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Socialism

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In principle, the same as market socialism, with state-owned enterprises operating in a market framework, but with the implication that they are acting strongly to maximize profits. Some Marxist critics of the Soviet Union used this term to describe it, arguing that the nomenklatura exploited workers in the same manner that capitalist owners exploited workers.

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State Capitalism

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Economic system with a market allocation system and private ownership of the means of production.

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Market Capitalism

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Economic system with both a command allocation system and state ownership of the means of production. The former Soviet Union was the most prominent example, and North Korea is the purest current example.

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Command socialism

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Economic system with a market allocation system and state ownership of the means of production.

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Market Socialism

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Economic system characterized by state control of crucial economic decision making, with private ownership of the means of production. Nazi Germany is a prominent example. It characterized the U.S. economy during World War II.

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Command capitalism

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Driving force of economic decision making in a centrally planned command economy.

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Planners’ Preferences

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Rule by the consumers, argued to be a fundamental characteristic of competitive
market economies.

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Consumers’ Sovereignty

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Period in Soviet history from 1918 to 1921, immediately after the Bolshevik Revolution, when White Russian and foreign armies tried to overthrow the Bolshevik regime. Economic policy was command without planning and with scattered nationalizations in an effort to achieve pure communism immediately. Grain
seizures from peasants led to a severe famine in 1921–1922.

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War Communism

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Actually, two revolutions took place in Russia in 1917. The first, in February, overthrew the tsar and was democratic. The Bolshevik Revolution came in October, led by Vladimir Lenin, leading to socialist economic policies and the dissolution of the democratic Duma (parliament). Also known as the Great October Socialist Revolution.

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Bolshevik Revolution (Russian Revolution)

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Goal of indicative planners in a market economy.

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Planned Market Economy

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Central planning directed at guiding and coordinating a mostly market economy on a strictly voluntary basis, in contrast with command planning. Widely used in France, Japan, South Korea, and India.

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Indicative Planning

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Getting people to work and otherwise do as desired by rewarding them materially, usually with money. Contrasts with moral incentives.

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Material Incentives

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In former Soviet Union this meant “planning how to plan,” and especially how to aggregate microeconomic plans to be consistent with a macroeconomic plan. In France simply means “planning.”

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Planification

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Maoist idea that individuals should work “for the people,” without necessarily being paid much money, for moral reasons. Appealed to in some socialist countries and even market capitalist economies during wartime.

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Moral Incentives

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Chinese movement under Mao Zedong from 1966 to 1969, although not formally ended until 1978, to purge society of culture from the pre-Communist period and to attack entrenched bureaucrats and “capitalist roaders.” Carried out mostly by youthful Red Guards.

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Great Proletarian Cultural Revolution (GPCR)

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Generally strongly pro-laissez-faire, anticommunist, and antisocialist school of economics that also believes in the subjective theory of value and questions equilibrium analysis. Founded in Vienna by Carl Menger in the 1870s, with the most important twentieth century members being Ludwig von Mises and Friedrich
Hayek.

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Austrian School (of economics)

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Idea of John Rawls that just societies should seek to maximize the quality of life of the worst-off person.

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Maximin Criterion

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Originally a French concept, taken up by Marx and Engels in the Communist Manifesto as the ultimate idea of collectivism. In its pure version, the state will wither away and distribution will be “from each according to his abilities, to each according to his needs.”

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Communism (Pure)

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Idea of Arthur Okun that too much equality can reduce incentives for growth in
an economy.

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Equity-Efficiency Trade-off

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Provisions made by a society for those who experience poverty, illness, or various disasters.

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Social Safety Net

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German concept developed after World War II by Ordoliberals that combines mostly free market capitalism with generous social welfare payments and redistribution.

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Social Market Economy (Soziale Marktwirtschaft)

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Rapidly growing economies, mostly in East Asia, that began to industrialize relatively recently. A term often associated with the Asian tigers.

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Newly Industrialized Countries (NICs)

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View that there should be minimal government intervention in the economy, from the French term literally meaning “let them do it.”

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Laissez-Faire

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Political movement in western Europe, especially northwestern Europe, that advocates combining market forces with substantial income redistribution, generally not involving nationalization of the means of production. The goal is essentially to establish the social market economy.

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Social Democracy

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Argument by Marx that, after the socialist revolution, the working class will be the rulers, although he saw this as ultimately democratic, as they would be the majority of society. Lenin used the idea to justify having a vanguard of the Bolshevik Party lead the society without elections.

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Dictatorship of the Proletariat

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Islamic law code, based fundamentally on the Qur’an and on sayings of the Prophet Muhammed in the Hadith. Based on different views of logical analysis and consensus judgments, four different Sunni Shari’as have arisen, as well as several Shi’i ones.

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Shari’a

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Income per person divided by the price level, considered to be the best available measure of the material standard of living

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Real per Capita Income

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Named for Thomas Malthus, author of Essay on the Principle of Population. A country is in a low-level equilibrium poverty trap if it has a high birth rate that prevents capital investment and growth, with entrenched poverty reinforcing its high birth rate.

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Malthusian Low-Level Equilibrium Trap

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Idea of Alexander Gerschenkron that the further behind a nation is from the global leaders in income level when it begins to experience industrial growth, the more rapidly it will grow, at least initially, while it is able to adopt more advanced technologies of leading economies.

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Relative Backwardness Hypothesis

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Corresponds to Pareto optimality, the idea that no one can be made better off without making someone else worse off.

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Static Efficiency

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Named for the Italian sociologist and economist Vilfredo Pareto. An economy is Pareto optimal if no one can be made better off without making someone else worse off. Now used as the standard definition of static efficiency.

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Pareto Optimality

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Maximizing the growth rate of an economy over time.

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Dynamic Efficiency

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Avoidance of fluctuations of aggregate output, employment levels, or price levels in an economy. Widely considered to be a major goal of policymakers in most countries.

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Macroeconomic Stability

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A number estimated annually by the United Nations for each country, ranging from 0 (bad) to 100 (good). Items entering the index include real per capita income, life expectancy, and educational attainment.

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Human Development Index (HDI)

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Number estimated annually by the Heritage Foundation based on a variety of factors to measure economic freedom. Ranges from 1.0 (totally free) to 5.0 (totally unfree).

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Economic Freedom Index (EFI)

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Depicts the income distribution of a society with the percentage of households on the horizontal axis in order of their incomes and the percentage of national income on the vertical axis. The curve is closer to the diagonal if incomes are more equal.

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Lorenz Curve

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The ratio of the area above the Lorenz curve to the area below the diagonal line. Varies from 0.0 (equal) to 1.0 (unequal). Used to measure income inequality.

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Gini Coefficient

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An intangible form of capital derived from relations with other people, usually as a result of established reciprocal relationships, often in organized groups, leading to high levels of trust and reduced transactions costs in economic activities.

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Social Capital