This current week in my economics' classes we will be discussing different types of “economic systems” or the ways that economies tend to organize themselves. We describe the three types of economic systems in terms of a continuum with a purely free market economy (pure capitalism) at the one extreme and a command economy (communism) at the other extreme, with anything in between the two extremes being called a mixed system.
Often in the media, we use a word called “socialism”, which is economically close to “communism” in terms of households all earning closer to the same incomes even though workers provide varying skills and value to society. Usually, the word "socialism", when used in the United States regarding our current situation, is characterized by the wealthy paying increasingly higher taxes, relative to the poor, which are, in turn, spent by the government for common goods (national defense, health care, roads, airports, etc.) or directly transferred to the poor (more welfare, higher unemployment benefits, etc.)
Relatively more economists than non-economists would be in support of a more capitalistic system than a socialistic system as the study of economics (how do we satisfy our unlimited wants with scarce resources) is mostly about having the proper incentives.
Let’s consider a hypothetical experiment in socialism (communism) using an AP classroom full of high achieving economic students:
Effective immediately, all grades in AP Macro will be averaged together and everyone will receive the same grade. My guess is that after the first test the grades might average to a B. The students who studied hard would become upset and the students who studied little would be happy. But, as the second test rolls around, the students who studied little would probably study even less and the ones who studied hard would decide not to study as hard as they did on the first test. My guess is that the second test would average to a D or C-! After the second test, no one would be happy, especially with me, as they would see their college transcripts deteriorating rapidly. When the 3rd test rolled around the average would probably fall to an F. Attempts by certain classmates to rally the class to a higher average would probably not be effective, even though their grade or standard of living would be at risk. I would predict that the scores would never increase and bickering, blame, and name calling would result in hard feelings as no one would study any longer for the benefit of anyone else. All of you may end up failing, and I would quickly be fired and have my tires slashed!
Socialism is ultimately economically inferior to capitalism because under capitalism (free market economy) when the reward is great, the effort to succeed is great; but when the government levels the playing field and takes more of the reward system for the achiever away; few will try or want to succeed as much as before and things tend to worsen with less productivity.
And that, economic students, is why virtually all economies tend to move in the direction of capitalism or free markets, as opposed to moving more towards communism or socialism.
Discussion Questions:
1. Is the classroom grading experiment discussed above a valid analogy, in your opinion, as to why most economists say that a capitalistic society will increase standards of living much faster than a more socialistic system (more leveling as the government transfers wealth from the rich to the poor)?
2. What positives can be achieved through a socialistic system, either economically or otherwise? Are their aspects of socialism in the US currently that you strongly support?
3. In the United States
1. The classroom experiment is a valid analogy. A capatalist economy encourages people to work harder and allows those who work the hardest to have an increased standard of living over those who don't work as hard. A socialist economy would promote laziness and things wouldn't be as efficient because everyone would be receiving the same pay.
ReplyDelete2. Although socialism might have a roll in inefficiency, there would be a much more equal standard of living across the board. There would be a decrease in unemployment and there would be less divisions of classes. Everyone would get healthcare and things would be much more equal.
3. I think that although some Republicans might be true, the allegations might be hyped up or intensified. The views are biased because they may dislike him because he is a Democrat, but it is true that his views might be socialistic. One example of this is ObamaCare. This is a way of making sure everyone receives medical care and is equal.
1. Yes, the classroom grading experiment is a valid analogy. I think this because if this was me in the analogy I would probably study for the first couple of tests then slowly stop studying. My thought process would be: If I'm studying and my grades are slowly deteriorating, it would not be worth to study. It is similar to marginal costs over marginal benefits, you should get the grade you tried for. If the marginal costs do not equal marginal benefits, something is wrong.
ReplyDelete2. A positive that can be achieved in a socialistic system is poor people can benefit more. The rich would be taxed and that money would go to helping out people that aren't so economically stable. Another positive is that people will always be looked as equals. I do not believe there are any aspects of a socialistic society that I support because it ruins the incentive to try harder and get products out faster. In my opinion, the economy would be worse off.
3. I do not think President Obama is intentionally leading the nation towards socialism. I have not noticed anything too socialist. I do not think this is 100% unsupported bias, however. It would be downright silly to make a claim with no solid evidence. However, I think some republicans are exaggerated saying he's trying to make the USA communist and things like that.
1.The classroom grading experiment is a valid analogy as to why most economists say that a capitalistic society will increase standards of living much faster than a more socialistic system because without any benefits or reasons, people are not going to work hard to achieve anything. If everyone is going to end up with the same pay and benefits, people are not going to put an effort into their work.
ReplyDelete2. A socialistic economy is one that describes an economy where households earn essentially an equal income, even if their work ethics differ. One positive aspect that can come from a socialistic economy is that the poor will rise in social class and live a better life. The aspect of socialism in the US that I agree with is our taxes being used for national defense and health care, due to the fact that they are important and need to be funded.
3.I don’t think Obama is intentionally leading the nation towards socialism, however, many of his decisions reflect a socialist economy. Obamacare is a socialist idea that Obama established, but at the same time the Republicans are over-exaggerating to some of his decisions, for the U.S. is not near a socialist economy.
1. Yes, I would say that the Classroom analogy is a fair way of representing the two systems. The analogy clearly shows how motivation to succeed would be destroyed due to the fact that if you try really hard then you wouldn’t get a fair grade. This example doesn’t perfectly represent socialism as it would be that everyone would get the same, in theory, and not that everyone would keep on deteriorating until they have all failed. This makes it seem that the failure of others directly affects you when in socialism other people’s failure doesn’t affect your life but the government system does. It would be a better example if no matter how hard the students tried they would get the same grade thus leading everyone to not trying at all as they will still get the same result. The example does clearly show how Capitalism is superior compared to Socialism.
ReplyDelete2. A socialist system always seems a lot better on paper and in theory there should be a lot of economic and social advantages. I would think that socialism would make the working class and the low income families a lot happier than it would the rich of society. Those who gain from socialism will obviously support it but those who lose from it will not. There should be a stronger sense of community and less poverty as everyone is sharing the same stuff and is in the same situation but overtime people would slowly begin to want a change as they would want more things and won’t want to be limited to what a government gives them. I think the best advantage of socialism is Free Healthcare as it should be a human right that every person can live a healthy life and shouldn’t be denied care. This has been implemented in the United States but has not caught on and has heavy opposition. I think if you want to have a socialist state that you have to start from scratch and not try to change an existing country.
3. I think a lot of republicans say is to try and discredit the Democratic party and we all know that politicians honesty streaks are not that long. Politicians often manipulate data and try to make out their opponents to be bad people. So although there could be truth in the Republicans statement, it could also just be political competition. I think socialism always looks like a good idea if you are the one that is leading it. The President knows that if the United States becomes socialist that he will still have all the luxuries he wants as he won’t have to conform to the socialist system. This is why a lot of socialist leaders become aggressive as they want to keep their power over others. I think President Obama is socialist in his view on Healthcare; he wants a similar system to England who has the NHS where every citizen has equal access to aid. I don’t think Obama is leading the US towards socialism but I do think that some of is policies are more socialist than capitalist.
1. I think that the analogy was a perfect analogy. In fact, my father used the same analogy to explain the differences to me. I believe that the analogy does show that a capitalistic society will improve the standard of living much faster then a socialistic society because the capitalistic society provides a better reward for hard work.
ReplyDelete2. A positive that can be achieved through true socialism would be that everyone would be the same. There would be no income inequality, thus problems between rich and poor would essentially be wiped out. Nevertheless, a true socialistic society is impossible
3. While Obama's father was a self professed "African Socialist", I do not believe that Obama is a true socialist. Some of his policies have certainly leaned more command economy based, but I believe that the Republican party has been exaggerating in order to take back control of the White House.
1. I believe this is an extremely simplistic analogy. This is an excellent analogy, but there are many exceptions. There are so many more factors that go into economy, motivation, etc. This is only one possibility. Some people may see it as something to take pride in; I've known students who won't work hard on an assignment, because they do not care if they get a bad grade. However, when placed in a group, sometimes the same student will work hard, since they do not want to be the one to bring the team down. Although this is a great analogy, we have to keep in mind that there are many more factors that would play into an actual economy, and this is oversimplified.
ReplyDelete2. Socialism could hypothetically be an amazing thing. If it was human nature to maintain motivation without incentive, and people were all amazing, charitable human beings, it would be the best form of economy without a doubt. Socialism prevents hierarchy or social/economic classes, helping prevent prejudices. This also keeps everyone equal, and assists from letting certain people (the rich elite) from gaining too much power. Socialism is a great way of keeping everyone on the same level, and helps to prevent people from struggling with poverty or something. It also gives the government more control over what the country is doing, allowing for a simpler way of life. In the U.S., despite being a capitalist economy, has several socialistic aspects. One of the most prevalent is healthcare. This is a great concept our country has grasped, and I fully support it. It's a great way to say that we will not just let our people get sick or hurt without help.
3. Most of the people claiming Obama is leading America toward socialism is mostly not completely aware of what socialism really is. President Obama is employing certain socialist principles, but this does not mean he wants socialism in America. There are many many factors that go into the type of economy we have, and adding a few programs will not tip the scale toward socialism. We still have lots of freedoms in our economy, and I do not feel that he is trying to change that.
1. The classroom grading experiment discussed above is a valid analogy. I think it is a valid analogy because it introduces a communistic society and shows how it functions. In the analogy, the students’ grades are averaged together, thus reflecting how the wealth in society is shared under communism. After the second and third test, the students who were striving to receive an A in the class lose motivation because they see that their hard-work and effort are not giving them the results they want. Because of this, the students who were striving to receive A’s lose motivation and the whole class average drops to an F. This analogy shows that in a communistic society, the people who strive to earn wealth and work hard will often lose their results and hard-earned money to people who do not work as hard. Productivity decreases because people know they don’t have to work too hard to receive rewards. The analogy shows that a capitalistic society will function better, because hard-workers and achievers have the initiative to earn great rewards.
ReplyDelete2. One positive that can be achieved through a socialistic system is that the wealth is spread-out through the society. This helps balance the quality of living so no one has too much more than anyone else. In a socialistic system, the people are literally “all in it together” because whatever one person earns and how hard they work, they have to share it with the society. One aspect of socialism in the U.S. that I strongly support is that taxpayers’ dollars are used to fund fire departments and police departments. Through these two departments, we have a sense of safety.
3. I am not fully familiar with all of Obama’s policies, but from what I do know, I do not think that Obama is leading us towards socialism. I think this assertion is consistently from biased Republicans, but I could understand why they think that Obamacare is a socialistic policy. Obamacare gives everyone equal health care so in the communistic sense, giving everyone health care seems like an idea that would fit into that category, but I still believe that he is not intentionally trying to make the U.S. a communistic country. I think it is too much of a stretch to compare Obamacare and socialism.
1. The classroom example discussed above is a valid analogy to why economists say that a capitalistic society will increase standards of living over a socialistic system. Competition is what capitalism thrives on and that is what motivates people to do the best job. If you work hard and get the same amount of money as someone who is lazy that does not motivate you to do your best job.
ReplyDelete2. One positive idea that can be achieved through a socialistic system is that the gap between the rich and the poor is almost non-existent. In a socialistic system no one has more and everyone is equal. The poor would have just as many opportunities as the rich and nobody would have an economic advantage in society. One aspect of socialism that the US currently has that I support is our social security. We all pay the same percentage and we all get close to the same amount back when we retire. This is a great way for our country to make sure that everyone has the chance to live a decent life after they are done working.
3. I think that Obama is trying to implement certain things from socialism that have worked in other countries, like healthcare. I think that is easy for the Republicans to say he is trying to make the US a socialistic nation because he is taking ideas from socialism. It’s politics and the opposing party is always trying to find faults with the other party. This is just one of many attempts the Republicans have made to try and make Obama look bad.
1. I believe that the analogy was an excellent instructional device that explains the failures of a socialistic system compared to a capitalistic one. It provides a good example of how hard work is directly rewarded and therefore encouraged in a capitalistic society, but not a socialistic one. However, strictly as an analogy, it has some flaws. The analogy works only if you assume that the class was motivated primarily by getting good grades. If the students in the class cared primarily about learning the material for the joy of learning, then they would study hard regardless of the grade they got, and because everybody would be studying hard, the grades would remain good. This condition may be satisfied in some elite classes which people would only take if they were already passionate about the subject. However, these conditions are rare, if they exist at all, in real world economies, which have people and have people motivated primarily by profit (or, in the analogy, grades). Otherwise, the analogy excellently explains why most economists prefer capitalistic systems.
ReplyDelete2. The primary benefit of socialism is that it promotes equality between people. While equality may not always be the primary goal of societies, it is certainly something to strive for. I support the existence of welfare systems as a means to allow people to support themselves when they cannot find work. However, I do not support welfare states so large that they remove the motivation of the unemployed to find work.
3. Obama has certainly intentionally introduced policies that are generally associated with socialism, or that have socialistic aspects. His policies like the GM bailout and the Affordable Care Act have interfered with capitalism in America. However, I think the Republicans' statements that Obama is leading the U.S. towards socialism are hyperbole. The Republicans calling his policies socialism is likely an attempt to try to frame Obama in a negative light so they can gain political power.
1. I believe the classroom situation is a valid analogy. The reason why most economics say capitalism is superior to socialistic systems is because people's hard work is rewarded in a capitalistic system. If someone works and earns a lot of money, they are able to keep the rewards, as they earned it themselves. In a socialistic economy, that person's hard work would be taken and distributed among everyone else, sharing the reward "equally". The standards of living would develop much faster in a capitalistic economy because everyone is working for themselves and they alone are responsible for their own success. If they work hard, they will receive what they want and be successful. With socialism, the hard workers pick up the slack of the lazy workers and everyone is given an "equal" award. The hard workers wouldn't see a point in working hard because everyone gets the same thing anyways. This would halt economic growth.
ReplyDelete2. Socialism generally sounds good on paper. It states that everyone is equal and thus will receive an equal amount of rewards. To those in the lower spectrum of society, that may sound good, but realistically it's not sustainable in the real world. Everyone receiving the same amount of rewards wouldn't be fair to the people who worked hard for what they have, and encourage lazy people to take advantage of that. I don't support the socialistic economic system as I think it would interfere with the advancement of society as a whole.
3. Democrats are known for wanting a bigger government, where everything is regulated and controlled. Republicans want the exact opposite, a free market with little government regulation and interference. President Obama, during his presidency, has expanded the role of the Federal Government in the average citizen's lives. Obamacare is a government regulated health-care system that many people weren't quick to support. Taxation is known to increase when Democrats are in office, where the rich are taxed more than the poor. The more you earn, the more you are taxed usually. Those taxes are used to fund other government projects. I think the view is somewhat accurate as some aspects of Democrat beliefs involve socialism.
1.The classroom analogy is a valid analogy. We could say for example the occupy wall street, we could say that was the bickering between the students after no one was getting the grade. A capitalist society would be better because the achievements that the government will put out would make the people work harder to get there. The socialist party isn't helping the situations because the poor is angry that they aren't getting enough money and the rich is mad that they are sharing wealth with the poor.
ReplyDelete2. Although i don't agree with it, a socialist economy helps distribute all the wealth throughout the country. A socialist society also prevents the social classes to grow larger. I don't agree with this system because it limits people's ability to do better things. Without a bigger objective or free market we are kind of stuck right in the middle.
3. I believe that the republicans are just saying that because they want control of the white house. But i see why they would say that. Obama has passed many new things during his presidency, let's say for example Obamacare. One of the biggest things Obama has done to say that he might be socialist is that he put up a tax policy on the rich because Obama thinks they need to pay their fair share.
1. Yes, I feel that the classroom grading experiment is a valid analogy as to why most economists say that capitalism increases standards of living much faster than socialism. When everyone gets the same grade or income, their incentive to do better in order to increase their standard of living decreases. Why would they want to work hard if their hard work wouldn’t pay off?
ReplyDelete2. The idea of socialism seems to be fair and secure because of the fair distribution of income. However, it’s actually the opposite. The harder one works, the more he or she will succeed. In a socialistic system, one person might work harder than another, and still receive the same income. If humans were robots, then we might all work with the same amount of effort to receive the same amount of money. But this is simply unrealistic. No, I do not support the aspects of socialism that I understand in the US. I think America is all about creating one’s own success; self-made men. It’s the American Dream!
3. I don’t think that President Obama is trying to actually change our economy from capitalism to socialism. However, I do believe he has certain socialistic views that he tries to pursue, such as wealthier people paying higher taxes than poorer people. I think Republicans fear that he is leading us away from true capitalism, which is frustrating because our capitalist economy is characteristic of America.
1. Yes, I believe that the analogy is definitely valid. A capitalistic society is much more efficient than a socialistic system on many fronts. Those that work hard are rewarded and those that do not work hard fail, it is that simple. In a socialistic society, less people are motivated to work, and less is accomplished.
ReplyDelete2. One large positive that can be achieved through a socialistic system is the fact that the amount of extremely poor people will be lower, but there is a negative to this as well. With less extremely poor people, there become a lot less middle/ upper class citizens to drive the economy.
3. Honestly, I do not know enough about Obama and his administration to answer this validly. But, I will say it does seem that Obama has too much control over the nation and many of his methods do seem borderline socialistic. There may definitely be bias from the Republicans as well, as their usually is by both parties.
1. The classroom grading experiment is a perfect example of how a socialistic system would operate. The whole example makes sense because the actions taken by the students would be exactly how I would act in that situation. But this example is also a good way to look at a socialistic system in very basic terms. When applied to a country’s economy, you can begin to see how problem can start to form.
ReplyDelete2. In theory, a socialistic system would benefit a person who is in the upper class because they would have to pay the same amount as somebody in a lower class. However this system would be very hurtful to somebody in the lower class because they would have to pay the same amount as a person in the upper class. In the United States, I strongly support institutions that help unemployed people find jobs.
3. I think that this statement is both fueled by bias and truth. When I think of Obama’s actions leading the country towards socialism, I mainly think of ObamaCare and the universality of the program. Republicans may still hold a grudge against Obama based on the fact that he does not support some things that republicans do. However, biases aside, actions that Obama has taken do point the U.S. into becoming more socialistic.
1. The classroom grading experiment described in the blog is a valid analogy for the system of socialism. In that structure of society, those who do not work hard become dependent on those who are putting in the effort, removing the hard workers' motivation.
ReplyDelete2. The concept of economic equality is given an interesting perspective by socialism. In theory, having a socialist system would technically give a level of stability to the people. However, people contribute various goods and services to the economy and perform at different levels of skill. Because of the large spectrum of economic diversity, it would not make any sense to adapt a socialistic system. Although this may equalize the distribution of wealth among the people, the well being and spirit of the American people would be at risk. Most people would be extremely upset over the idea of a fixed amount of reward, no matter the amount of hard work or sloth. In addition to the diminishing of integrity, America would slowly begin to lose economic advancement.
3. I do not think that Obama is leading the nation towards socialism. Many people do feel as if Obamacare is a socialistic structure, which may seem to adheres to the beliefs of socialism. To answer the question, I do not think that Obamacare means that Obama is leading the nation towards socialism. Obama has tried to find an equilibrium for healthcare- many may say that he has succeeded at this but many say he has failed. It is truly a matter of opinion and political affiliation.
1. I believe the classroom grading experiment is an effective analogy describing the effects of a socialist economy, as it accurately portrays that a lack of competition in industry would subsequently inhibit economic growth and the standard of living as a whole. If a doctor and a retail worker hypothetically made similar salaries in the United States, no one would want to be a doctor because of the extensive education and training required; it would be much simpler to go into retail with little training and make the same amount of money.
ReplyDelete2. Although many believe that Universal Healthcare is one of the positives of a socialistic economy, I believe this to be untrue. Universal healthcare does not mean everyone has access to healthcare, and it includes problems such as extremely long wait lists and restrictions on physician choices. The best economies in the world always incorporate capitalistic ideals into thier system; even if it is a socialistic idea such as universal health care.
3. On this issue; I cannot say for certain. Although bias can turn to hearsay in politics, I feel as though Obama is incorporating some basic socialist ideals into the US Economy, but more to model those nations such as Switzerland and Germany than to push a socialist agenda. National Health care just happens to be on the forefront of the debate, as it affects every American pretty directly, and is used constantly as either slander or praise for the US economy. Redistribution of wealth is another socialist principle that the United States has incorporated since the presidency of FDR, but it does help the lives of many Americans. Although It is true that in Obama’s first term welfare spending jumped almost 32%, Republicans like to pin the idea itself on president Obama, and many use this argument to call Obama a “communist”. It is my opinion that He and his staff have simply not found the correct way to give money to people who are actually in need of it. In a strictly economic sense, It is my belief that Obama has just been incompetent,but I do not see him pushing a socialist agenda.
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