COMPARATIVE CULTURAL

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COMPARATIVE CULTURAL ECONOMIC SYSTEMS
ECONOMICS 331 DR. GARCÍA III
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COMPARATIVE CULTURAL ECONOMICS Definitions
Classifications
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Comparative cultural economics is hard to
define an area or field in economics in search
of a definition.

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Comparative Cultural economics

• Studies economic outcomes in different cultural
  settings and how economics interacts with the
  culture of the system.
• Economics systems must be understandable and
  observable along with the understanding of
  resources, their scarcity and endowment.

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Economic outcomes

• Economic outcomes of a system are influence by
• Traditional and non traditional inputs land,
  labor, capital, and managerial ability.
• Technology innovation and invention.
• Social forces and cultural forces (invisible
  handshake).
• Economic forces (invisible hand)
• Political and legal forces (invisible foot).
• Geographic forces.
• Random forces.

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Economic System

• An analysis of a system must understand and
  control all the relevant variables in order to
  study that economic system.
• For example, economic level of development of the
  economic system can be measure by using per
  capita GDP and other aggregates. So
• Need to know relationships between economic
  development and GDP.
• Percentage of services, industry, and agriculture
  in GDP.
• Level of development.
• Non traditional elements which might affect the
  GDP such as social, cultural, political,
  religious, legal, sovereign, and historical
  forces.

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Definition of Economic Systems

• Since it is hard to define an economic system,
  they are define based on their classifications.
• Economic systems are classified into
• Traditional classification by using ideological
  classification or spectrum of isms or by
  anthropological classification using
  environmental, social, historical, and cultural
  classification.
• Modern classification by considering a system as
  a form of organization, the system then, defines
  the tools of organizational theory.
• This classification identifies important
  characteristics such as ownership of the means
  of production, class structure, role of the
  state, mode of culture, and other institutions.

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Traditional Classification ISMS

• Ideological Classification
• Feudalism.
• Mercantilism
• Capitalism
• Socialism
• communism

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Traditional Classification - Social

• Economic Anthropology - Cultural Economics
• Nomadic
• Foraging bands.
• Hunters.
• Sedentary.
• Horticultural (tribes).
• Pre-capitalist states.
• Agrarian and present societies.
• Agricultural societies.
• Industrial societies.
• Informational societies.
• Globalization

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Modern classification

• Organizational theory
• Nature of information mechanism.
• Behavioral rules.
• Individual versus collectivism.
• Decision making arrangements.
• Property rights.
• Role of the sex (gender).
• Formal versus informal sectors.
• Urban versus rural areas.

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Economic system

• is a set of mechanisms and institutions for the
  implementation of decisions concerning
  production, consumption, allocation,
  distribution, exchange, income, and technology
  within a given geographic area (sovereignty).
• An economic system consists of mechanisms and
  institutions of organizational arrangements and
  decision making rules.

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Economic Systems

• An economic system can vary in any of its
  dimensions , particularly its structure, its
  operations and functions, and its adaptability to
  traditions, values, beliefs, norms, taboos, and
  attitudes (culture distinctive way of life of a
  group of people) and the resulting behavior
  patterns that directly affect economic behavior
  and outcomes.

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Economic Systems

• An economic system is multidimensional
• ES f( A1, A 2, A3, A 4 .An)
• Where
• ES Economic System
• A Attributes or characteristics of the system.
• Economic systems are define in terms of many (n)
  characteristics, i.e., ownership of property.

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Economic Systems

• There are four general attributes, A4
• Organization of decision making arrangements ?
  structure.
• Mechanism for the provision of information and
  for coordination ? Market and plan.
• Property rights ? control of FOP and Income
  return.
• Mechanism for setting goals and objectives, and
  for including and inducing people to act ?
  incentives and rewards.

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First Attribute Structure

• Structure is an outcome based on value added ,
  for example, some economic systems are heavily
  agricultural in nature, others are in
  manufacturing activities, and if the economic
  system is highly developed then it will be in the
  services which provide highest amount of labor
  value added.
• with development, transition on structure
  usually occurs.
• Example of two societies
• Columbus, Ohio service oriented with skilled
  labor and managerial ability (service oriented
  society).
• Cleveland, Ohio Manufacturing, unskilled labor,
  capital intensity Manufacturing oriented
  society).

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First Attribute Structure

• Structure deals with the organization of decision
  making arrangements.
• Organization is structure.
• The rules of the organization are determine by
  culture, rules and laws and their enforcement.
• There are external frameworks, self imposed
  rules, values, beliefs, norms (mores and
  folkways), attitudes, and traditions that limit
  their behavior.
• Examples of organizations government
  departments, stock markets, corporations,
  charities, labor unions, churches, schools, etc.
• Organization rules are generally written and
  codified and are subsidiary of general culture
  and laws of society.
• Nobel Herbert Simon an organization refers to
  the complex pattern of communications and other
  relations in a group of human beings within the
  context of their culture.
• J. M. Montias an organization consists of a set
  of participants (members) regularly interacting
  in the process of carrying on one or more
  activities within a culture and sovereignty.

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First Attribute Structure

• Organizations must have some turnover in its
  membership and
• must be able to change the activities it pursues.
• Organized behavior has different advantages than
  unorganized.
• In an organization goals exist, information is
  created, and assumptions and attitudes are
  formed.
• In an organization individuals participate in an
  organized behavior to pursue self interest
  constrained by bounded rationality.

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First Attribute Structure

• Self interest is the maximization of some utility
  function constrained by a broad range of human
  limitations such as ability to generate, process,
  and utilize information.
• Self interest means that I take priority over the
  unknown.
• Self interest means to always take more out than
  what you put in that is, efficiency where the
  value of output exceeds the value of inputs in
  the productions process.

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First Attribute Structure

• Two organizational problems in a system of self
  interest participants
• Technical administrative problems derive from
  individuals who are limited in their ability to
  make decisions because of incomplete information.
• Agency managerial problems derive from
  individuals who, while pursuing self interest may
  pursue objectives different than those
  established by the organization. For example,
  employees objectives and employer objectives, and
  Board and CEOs objectives and shareholders'
  objectives.

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First Attribute Structure

• To handle these two problems, the organization
  must establish a set of rules which set up
  subgroups within the organization assigning
  tasks, coordinating activities, monitoring
  activities, and describing the nature of
  incentive arrangements.
• Rules of the organization along with external
  factors such as culture, history, politics, etc.
  determine the nature of the organization and lead
  to basic and important distinctions among
  economic systems.

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First Attribute Structure

• Rules of the organization are written, codified,
  and preempted by societys culture and laws.
• Procedures are less formal than rules, the day to
  day running. Less formal forces than laws, and
  easily change but more enduring, for example,
  employment practices, promotions, ways of
  purchasing and produce.
• Culture (traditions, customs, values, beliefs,
  norms) also determine economic outcomes, do
  things different ways and have particular values,
  beliefs, norms, prejudices, and traditions, for
  example, high trust societies like Japan and
  Germany, flexible institutions in USA, and low
  trust such as France, China, and Italy.

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First Attribute Structure

• Rules of the Organization (structure) determine
  how activities are carry out by organization
  within two extremes
• Hierarchy where the superiors/principals
  establish objectives and issue orders to the
  subordinates/agents who carry out assigned tasks
  leading to achievement of organizational
  objectives and goals.
• Association where the decision making occurs
  among individuals where there is not
  superior-subordinate relationship but, rather
  equality among individuals, i.e., corporate
  stockholders/shareholders.

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First Attribute Structure

• Rules of the Organization (structure) most common
  is hierarchy but with different degrees
• Number of levels of the hierarchy.
• Allocation of tasks among the levels.
• Span of control and number of subordinates
  directed by superior.
• Changes of hierarchy roles, i.e., agents becoming
  superiors.

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First Attribute Structure

• Organizational hierarchy
• Technology systems require team production
  because team efforts produces output but it is
  difficult to access individuals contribution.
• However, this may slack production unless
  superior monitors work and rewards efforts.
• There are two reasons for hierarchy in
  organization
• Risk takers/risk avoiders.
• Costs.

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First Attribute Structure

• Reason - risk takers/risk avoiders
• Employees (as FOP) work for the owner and obey
  instructions.
• Employer rips rewards of profit and success.
• But employer risks losses if business fails.
• Production is hierarchical because management
  problems are complicated to organize production
  through markets.

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First Attribute Structure

• Reason for structure of organization Costs
• Coordination and decision making in markets have
  costs such as capital, legal, financial,
  objective and subjective, fixed and variable
  costs.
• Costs can be decrease and avoid through market
  coordination and managerial cooperation.
• Market coordination is the coordination of
  economic activities using the price system
  mechanism to allocate resources and transmit
  information or provide incentives.
• Managerial Cooperation is the coordination or
  direction from managers to subordinates to
  coordinate the economic activities of the
  organization.
• Coordination of decision making activities have
  costs with respect to market cooperation and
  managerial coordination.
• Examples of managerial costs are contract costs,
  directing and training employees to fulfill
  required tasks, or hiring subcontractors.

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First Attribute Structure

• Structure of the organization of (economic)
  systems can be characterized by the level at
  which resource allocation decisions are made and
  executed
• Centralized decisions are made at the high
  levels of the organization.
• Decentralized decisions are made at the lower
  levels of the organization.

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First Attribute Structure

• Centralization is characterized by a single plan
  governing the utilization of economic resources
  and production of output which are prepared ,
  codified, and formalized as law.
• Problems with centralization
• Quantity of information gathered.
• Accuracy of information gathered.
• Only planners are well informed and resources are
  usually not use right.
• System of quotas is use to avoid overestimation
  of capital and raw materials.

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First Attribute Structure

• Decentralization important decisions are taken by
  individuals rationally and self interest
  motivated or private institutions.
• The government functions are largely to provide a
  framework and stability within which the markets
  can operate.
• Decentralization does not necessarily mean
  non-planning.

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First Attribute Structure

• Differences between centralization and
  decentralization are important to use to know how
  the organization achieve objectives in the
  decision making.
• Decision making within an economic system are
  made or assessed in terms of organizational
  structure which is the way in which the
  organization generates and utilizes information
  and the way in which organizations structure
  allocates authority and responsibility for the
  decision making among the levels of the
  organization.

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First Attribute Structure

• Hierarchical organizational structure Superior
  subordinate
• Agents are organized in groups, subunits, and
  smaller organizations, i.e., branch,
  global/multinational, conglomerate companies,
  government enterprise to a department, state
  government to a ministry of the federal
  government.
• Structural organizations enter into contracts via
  the principal who has controlling authority and
  engages an agent to act subject to the
  principals control and instructions (scope of
  employment).
• Agent is the party that acts for or on behalf or
  as a representative of the principal.
• Co. X (principal) contracts with Co. Y whereby
  agent of Y supplies principle of X.

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First Attribute Structure

• The principal allocation of resources takes place
  in the enterprise (economic coordination) yet the
  decision (authority) may be below or above.
• Lower level decisions (enterprise - plant).
• Intermediate decisions (corporation or branch
  department - CEOs/Mgt.).
• High level decisions (conglomerate or ministry
  Board of Directors)

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First Attribute Structure

• Two factors determine the level of resource
  allocation
• Authority (distribute within the organization).
• Information (way of resource utilization).
• Examples of Authority
• In a perfectly centralized economy authority is a
  single central command and lowers to lower units
  of the organization.
• In perfectly decentralized economy all the
  decision making authority rests within the lower
  subunits ( HH /Business) independent of superior
  authority.
• In the real world authority is spread through
  different levels of hierarchy.

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First Attribute Structure

• Example of information
• Perfect centralization the information means that
  a single decision maker possess all information
  about all participants, their actions, and their
  environments.
• Perfectly decentralized decision makers possess
  and utilize information .
• Informationally decentralized economy generates,
  process, and utilizes information at the lowest
  level without exchanging information to higher
  levels of the organization, for example, prices
  are exchange only at the lower levels.
• Informationally centralized economy involves the
  generating, processing, and utilization of
  information by superiors and subsequent
  transmission to only limited lower units.

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First Attribute Structure

• Perfectly centralized information is almost
  impossible because information on prices,
  locations, outputs, and technology is too
  overwhelming to centralized.
• The lower levels have advantage on this
  information and have opportunistic behavior,
  meaning that lower level units can use the
  information advantage against the interest of its
  superior.
• Agents hold information back to use against
  authority (blackmail and leverage weapon).

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First Attribute Structure

• Types of opportunistic behavior
• Moral hazard.
• Adverse selection.
• 1. Moral hazard type of opportunistic behavior
• Occurs when the level unit exploits information
  advantage to alter its behavior and relationship
  in its contract with superiors.
• For example, buyer offers seller steady supply at
  a fixed price if seller acquires equipment
  specialized to buyer.

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First Attribute Structure

• 2. Adverse selection as to opportunistic behavior
  in decentralization of information
• Occurs when agents (lower units) conceal
  information from superior (principal) making
  impossible for the principal to distinguish among
  them.
• For example
• - all enterprises tell a government agency that
  they can not adopt to new technology or
  regulation.
• - company conceal costs to avoid taxes.
• - strikes and riots by lower levels.
• - Headquarters absorbed costs to subsidiaries
  such as tariffs,
  
  taxes, or
  show records with lower costs.

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First Attribute Structure

• Levels of Hierarchy

CENTER
CENTER
SUBUNITS
INTERMEDIATE AUTHORITY
SUBUNITS
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Second Attribute Market Vs. Plan

• Another dimension or attribute to compare
  economic systems and their economic activities
  may be coordinated based on reliance to planning
  or market.
• Both are mechanisms for providing decisions in
  economic systems.
• Market economies are usually associated with
  decentralization.
• Market economies can combine concentration of
  decision making authority and information in few
  large corporations with substantial state
  involvement without being a planned economy.
• Planned economies vary from centralized planning
  of former Soviet Union to indicative planning of
  France and a combination of them.
• Planned economies reveal different levels of
  coordination mechanism such as Norway in one
  extreme and Japan on the other.

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Second Attribute Plan Economies

• The government determines or at least seeks to
  influence the answers the coordinating economic
  questions.
• Command Planning
• Government controls of production.
• Government controls all enterprises and
  institutions.
• Government controls the flow of resources,
  materials, and finished commodities (circular
  flow).
• Plans are formalized and endowed with the force
  of law.
• All actors and players are required to follow
  procedures and achieve targets prescribed under
  treat of sanction.
• It is compulsive and coerced.
• The planning is done at the top.

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Second Attribute Plan Economies

• Subunits are subordinated by specific
  instructions or directives formulated by a
  superior agency Planning Board and
  disseminated through a planned document
  Directive Planning.
• Participants are induced to carry out the
  directives via appropriate incentives or threats
  designed by planning authorities which specifics
  differ from economy to economy.
• Economic activities are guided by instructions or
  directives from higher units and transmitted to
  lower units.
• Rewards and threats depend on the achievement of
  plan directives.

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Second Attribute Plan Economies

• Resources are allocated according to instructions
  and commands of planners who thereby usurp the
  role of the market as allocators of the factors
  of production.
• Society's desires and preferences dominate the
  political system but in reality is only some
  consumers.
• Decisions are made by the planners and
  therefore, planners preferences prevail.

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Second Attribute Plan Economies

• Indicative planning
• Government relies primarily on voluntary and
  uncoerced.
• Response to the private sector with a set of
  guidelines produced as a result of discussions
  among the government, industry, and labor.
• The objective of planning is to provide
  information base on consensus on the broad
  direction of the economy.
• Expertise of the government on marshalling/maneuve
  r statistics, producing forecasts, provide
  forums, formalize outcomes, and initiate remedial
  actions.
• The main purpose is to plan and lay out functions
  of the economic system parallel to the market.
• Western Europe (France) and Japan are examples.

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Second Attribute Market

• Market forces of demand and supply, buyers and
  sellers, provide signals that trigger
  organization to make decisions on resource
  utilization through the price system mechanism.
• There is freedom and no coercion and the outcomes
  are determine by the voluntary actions of
  individuals,
• therefore, absence of bureaucratic constraints
  and maximization of the role of choice.
• Power is concentrated on individuals in the form
  of wealth (ownership of resources) or groups
  formed voluntarily, for example, corporations.

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Second Attribute Market

• Market coordinates the activities of decision
  making units.
• Households earn income by providing the FOP
  (land, labor, capital, and entrepreneurship).
• Households buy goods and services with their
  income that business supply.
• Households and firms respond to the market.
• There are many mechanisms of information.
• Authority is vested at lower levels of the
  economic activities.
• Government can exercise influence over what goods
  and services are produced.
• Factors such as public goods and externalities,
  and market power of large concentrations of firms
  (monopoly and oligopolies) abridge the consumers
  ability to dictate resource allocation.
• Consumers vote and exercise consumers
  sovereignty.
• A vote cast indicate what goods and services are
  desire/wanted by the market.

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The Circular Flow
Factors of Production services
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Second Attribute Plan

• Indicative Planning
• Market serves as principal instrument for
  resource allocation but a plan is prepared to
  guide decision making.
• Planners seek to project aggregate or sectoral
  trends and to provide information beyond that
  normally supplied by market.
• It is not broken into directives or instructions
  for individual production units.
• Enterprises are free to apply information in the
  plan as they see fit though indirect means are
  use to influence.

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Third Attribute Property Rights

• Property rights as attribute or characteristic
  means control and income power (control and
  return on control income).
• Ownership refers to the various property rights
  that individuals may have over objects or claims
  on objects or services.
• ownership rights affect disposition and
  utilization of resources.

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Third Attribute Property Rights

• Nature and extend of individual rights
• All economic systems (through the government)
  impose some constraints on individual rights of
  their economic matters.
• The type or character of society is determined by
  the extend of rights and freedoms of the
  individuals.
• The right to own property such as food, clothing,
  shelter, furniture, etc. and the rights to have
  the means of production such as enterprises,
  tools and machinery, organizations, inventories,
  and the rights to use goods and services varies
  in the different economic and cultural systems.

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Third Attribute Property Rights

• Distinction of property rights under different
  IMS
• 1. Socialism the means of production are owned
  by the state.
• 2. Capitalism free enterprise, resources are
  owned by individuals or freely associated groups,
  the rights to property are restrictive.
• Capitalism government may oversee the
  environment, imposed, zones, licenses, prevent
  profiteering from disasters, law of waste, rent
  and wage controls, grant monopolies (utilities),
  regulated commodities and prices gasoline,
  firearms, tobacco, and alcohol.
• Few laissez faire Hong Kong, Macau, Singapore.

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Third Attribute Property Rights

• Property Rights
• Extend beyond merely physical property such as
  clean air, right to quiet enjoyment, right to
  access, right to earn income from invention,
  right to write and broadcast.
• In the West
• developed incrementally, adapted and extended
  both by precedent and by laws.
• New technology and new circumstances have
  required new rights be defined, for example,
  environmental property rights, intellectual
  rights, right to use and access waves and
  frequencies, and right to quiet enjoyment.
• Physical property rights ensure forms of market
  relations but does not go as far as stimulate
  efficiency.
• Property rights is a bazaar not a market Yalsin
  on Russian reform economics.
• Legal systems function to promote efficiency and
  utilization of scare FOP.
• Laws protect property rights

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Third Attribute Property Rights

• Categories of property rights (ownership rights)
• 1. right of disposition
• 2. right to transfer the ownership rights to
  others within or outside the organization
• 3. right of utilization
• use the good or service as the owner deems
  appropriate
• rights to use the product
• right to protect property

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Third Attribute Property Rights

• 1. Disposition of goods and services
• The transfer of ownership to others within or
  without organization or system.
• Right to sell or exchange property at a price
  deem appropriate by the seller (efficiency
  through the price system).
• 2. Ownership is the right to utilization
  whereby the owner can use goods and services as
  deem appropriate .
• It is the right to earn income (cash flow
  rights).
• 3. Right to use goods and services generated by
  the goods and services in question.
• Control right privatization versus
  nationalization.

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Third Attribute Property Rights

• Ownership refers to various property rights
  individuals may have over objects or claims on
  objects or services.
• May be rest within more than one individual at
  different times.
• Example rent a car. You have utilization but not
  disposition and stockholders owned the companys
  profits but not operation of the company.
• may be temporary or permanent
• may be de jure - rightful and legitimate
  ownership. Has actual possession and rightful
  title of property (by law).
• may be de facto - equity not actual possession
  nor rightful and legitimate ownership
  established by custom and usage.

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Third Attribute Property Rights

• Forms of property rights
• 1. Private
• 2. Public
• 3. Collective cooperative.

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Third Attribute Property Rights

• type of ownership
• 1. private
• right to possess, utilize, and dispose of
  property rests on the individual owner(s)
• owners maximize the lifetime income of property
• capital will yield the highest rate of return
• property yields income to individuals
• time preferences of ownership determined by the
  individual
• use revenue/cost analysis - profit maximized -
  where MRMC
• no risk --gt market allocation mechanism

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Third Attribute Property Rights

• Type of ownership
• 2. public
• right to utilize and dispose belongs to the state
  (collective)
• use benefit/cost analysis
• society determines lifetime income
• no risk
• time preferences determined by the state
• 2. cooperative/coolective
• the right does not belong to the individual nor
  state
• property belongs to the group

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Fourth Attribute Incentives

• The fourth attribute or characteristic is the
  mechanism for setting goals and objectives, and
  for including and inducing people to act.
• encourage people and therefore, incentives and
  rewards which change peoples behavior.
• important in the transformation, ownership, and
  organization of property rights.
• incentive mechanisms induce participants from
  lower hierarchical levels to fulfill the
  directives of higher level participants - can be
  material or moral.

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Fourth Attribute Incentives

• Conditions of Incentives (three)
• 1. The person who is to receive the reward must
  be able to influence the outcomes for which the
  reward will be given
• 2. Superior (principals) must be able to check on
  subordinates (agents) to see whether tasks have
  been executed properly
• 3. Potential reward must matter to subordinates
• General comments
• In hierarchy, incentives are important if there
  is perfect information to know if tasks are
  carried our properly
• Principal needs to develop incentives for agent
  to act on interests of principal
• The way that the system is organized affects the
  information incentives of principals and agents

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Fourth Attribute Incentives

• Incentives may be material or moral
• 1. Material Incentives
• typical of modern economical societies
• promote desirable behavior by giving the
  recipient a greater claim over material goods
• give recipient cash bonuses
• neoclassical those who provide inputs to system
  are rewarded according to productivity
• Therefore, rewards are offered for higher
  productivity
• can be done when property isnt private
• 2. Moral Incentives
• Rewards desirable behavior by appealing to
  recipients responsibility to society or company
  and raises the recipients societal stature within
  the community
• doesnt give recipients command over material
  goods
• bestows a medal or trophy
• moral incentives are more important under public
  ownership because it builds into future
  organizations

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Evaluation of economic outcomes

• General Comments
• Economic outcomes can be systematically related
  to variations of economic systems which is the
  central factor of comparative economic systems.
• The central focus of comparative economic systems
  is the characterization of the differences in
  economic systems and the influence of those
  differences on outcomes.
• The field of comparative cultural economic
  systems sustains comparative analysis using both
  the theoretical and abstract models and real
  world variants.
• Models serve to make comparisons in simple ways
  and provide a means for production outcomes to
  establish a norm for assessing ultimate real
  world outcomes.
• Theoretical models compare and assess theoretical
  variants
• In the real world, complicated measurement
  problems limit the ability to relate observed
  outcomes to theoretical ideas.

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Determination of economic outcomes

• Influence by culture, history, freedoms, and
  classifications.
• Outcomes means measurable consequences like per
  capita income, distribution of income, business
  cycles inflation and unemployment, demographics,
  standard of living, life expectancy, education,
  consumption, health index, sex. Etc.
• Outcomes are the result of interactions among the
  available resources, the institutions, culture,
  and the rules that govern the system.

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Determination of economic outcomes

• Comparative cultural economics is concern with
  how the goals and objectives of different
  economic systems vary because of culture and how
  the system of different economies contrast such
  that wealth endowments result in different
  outcomes.
• Outcomes
• Leave a 50.00 dollar bill on sidewalk and see
  who picks up and what people do,
• The parable of the talents ( Mathew
  2514)servants given talentss by master and how
  all used the fortune differently.
• Some nations rich and other poor.
• Egalatitarian versus discriminative.
• Human capital development
• Environmentally sound.
• Fast depletion of resources.
• Healthy life expectancy.

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Determination of priorities

• Priorities are different from system to system.
• If power is centralized then authority determine
  priorities.
• If power is democratic then individuals can
  express priorities by voting (dollars).
• A vote cast in the marketplace indicate what
  goods and services are desire/want.
• Pressure groups (unions, associations, groups,
  partes) can exert influence on priorities.
• Pluralistic democratic societies the power is
  concentrated on the individuals in the form of
  wealth or in the hands of lobby groups or
  corporations.

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Outcome of Goals and objectives of society

• Can only be achieve by sacrificing other less
  important goals and objectives (trade-offs and
  opportunity costs).
• Scarcity of resources forces choices when
  pursuing goals and objectives therefore,
  preventing the production of unlimited quantities
  of goods and services.
• Nature of trade-offs is never clear, for example
  inflation and unemployment (Phillips curve)
  economic welfare in Europe and economic growth
  Chinas open economy and trade and political
  dictatorship military power and environmental
  quality.
• Performance depends on outcomes economic growth,
  efficiency, income distribution (fair), stability
  (inflation and unemployment, and viability of
  system.

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Force influencing economic outcomes
Economic systems

• OUTCOMES
• Econ. Growth
• Econ. Development
• efficiency
• Income distribution
• Stability
• Trade-offs

Cultural/environmental factors
Operational Factors
Functional Factors
Policies
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Forces influencing economic outcomes

• Forces Influencing Economic Outcomes
• Outcomes
• Economic Growth
• Economic Development
• Efficiency
• Income Distribution
• Stability
• Trade Offs
• Forces that Influence these Outcomes
• Economic systems
• Policies
• Environmental Factors
• Operational Factors
• Functional Factors
• O f (ES, Pol, Env, O.F., F.F.)O F(ES, C/Env,
  Pol, OF, FF)
• In addition to economic systems (ES), outcomes
  are influence by variety of forces conveniently
  aggregated as cultural, policy, functional and
  operational factors.
• It is difficult to isolate them and know their
  real impact even when ceteris paribus applies

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Evaluation of economic outcomes

• Problems of Factors
• Labor Productivity as outcome low in Russia,
  India, and China compared to the EU and United
  States.
• Economic Development level in China and India is
  low if measured per capita. GDA compared to US
  and EU.
• Agricultural Performance in Russia and England -
  grain yields were low in Russia compared to
  England
• Other Elements also affect this The difference
  is not only on economic systems but fertility of
  land, supply of labor, fertilizer, and multiple
  crop systems
• As outcomes of economic activity of different
  economic systems will be studied and evaluated,
  it is important to identify clear performance
  criteria and develop some generally subjective
  weighting criteria to aggrandize this criterion
• Although the result of such an exercise is mainly
  subjective, there is a considerable measure of
  agreement on the criteria that might be used to
  assess economic performance
• must recognize the importance on the economic and
  non-economic criteria when observing stability,
  trade off, efficiency, and income distribution

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Evaluation of economic outcomes

• Performance criteria Economic Growth, Economic
  Development, and Efficiency
• Economic Growth refers to increases in the output
  of goods and services in a system and or
  increases in output per capita
• Economic Development is societal changes and
  improvements on the well being of the population
  through innovation and technology
• Efficiency is the effectiveness in which a system
  uses its resources at a point in time (static) or
  through time (dynamic).

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Evaluation of economic outcomes Efficiency

• Extensive and Intensive Economic Growth
• Extensive Economic Growth - growth achieved
  through the expanded use of resources - ability
  to produce more output through innovation and
  invention
• Intensive Economic Growth - growth achieved
  through the better use of resources
• Through difficult to measure with precision, the
  concept of efficiency is frequently related to
  extensive economic growth (growth achieved
  through the expanded use of resources) and the
  concept of intensive economic growth (growth
  achieved through the better use of resources)

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Evaluation of economic outcomes Efficiency

• Economic and Technological Efficiency
• Economic or Allocative Efficiency - ability to
  use resources in the right places to get the most
  efficient output - uses Intensive Economic Growth
• Technological Efficiency - ability to produce
  more output through innovation and invention -
  Uses Extensive Economic Growth
• Efficiency and the Production Possibilities
  Frontier
• Static Inefficiency - operating within the
  Production Possibilities Frontier
• Static Efficiency - operating on the Production
  Possibilities Frontier
• Dynamic Efficiency - operating outside the
  Production Possibilities Frontier

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Evaluation of economic outcomes Efficiency
P1 static efficiency P2 statically
inefficiency P3 dynamic efficiency
Consumer goods
Convex b/c law of increasing costs, trade-offs,
and opportunity costs. All possible combinations
of c/er and p/er g/s that a particular econ.
System is capable of producing at aprticular time
using all available limited resources at maximun
efficiency
P3
P2
P1
Producer goods
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Evaluation of economic outcomes income
distribution

• Income Distribution
• Can be measured with the Lorenz Curve ( of total
  income vs. of householders)
• Perfect equality would be a straight line on the
  Lorenz Curve
• The Gini Coefficient measures the differences in
  equality and inequality
• Income Inequality Reflects
• efforts in the provision of labor
• frugality - provision of capital
• ownership of resources
• fortune (luck)
• inheritance of physical or mental
  capabilities
• taxes
• provision of social services

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Income distribution Lorenz curve and Gini
coefficient
Gini coefficient difference between equality and
inequality curves
Perfect/absolute equality
Perfect inequality
of total income
Gini coefficient
Brazil
England
Imperfect inequality
of households
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Evaluation of economic outcomes stability and
trade-offs

• Stability
• ability of an economic system to grow without
  significant cyclical fluctuations such as
  inflation and unemployment - also does not have
  fluctuations in economic growth.
• instability leads to losses in output.
• Trade-offs
• military power, environmental quality, health,
  education, infrastructure, democratic political
  institutions, higher or lower taxes - we must
  sacrifice something to obtain something else.
• possibly the ultimate test for an economic.
• Levels of income
• Nations can be compare regarding income levels.

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Evaluation of economic outcomes level of income

• Levels of income
• Nations can be compare regarding income levels.
• GDP adjusted to money using exchange rates.
• Few economies have very high levels of income
  (less than 15) but account for 80 of the
  worlds product
• 56 of world population lives in relative poverty
  with no hope and accounts for less than 5 of the
  worlds GDP.
• Developed market economic systems account for 23
  richest countries.

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Evaluation of economic outcomes

• Performance means high economic growth.
• Chile due to privatization
• China and India due to open economy to foreign
  investment and trade.
• Singapore and Hong Kong due to market oriented
  economic system through non democratic
  governments.
• United States due to market system and high level
  of technology.

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COMPARATIVE CULTURAL ECONOMICS Definitions,
Classifications, outcomes
end
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