COMPARATIVE ECONOMICS

Modern Economic Systems – The State and The Market

The classification of economic systems

Technological level and institutions

The role of property

The allocation of the production factors

Work Capital Land

The institutional shell

The forms of public service

The scheme of economic regulation by the state

The redistribution methods of income sources and income

The specific forms of property

The peculiarity of money

Typifying the economic systems (I.)

Early theories of the stages of growth: the stressing of singular factors (for instance: production or allocation): the differences between systems disappear

Marx and Engles: the relation between the historical development of the social economic system and the forces of production

Late theories of the stages of growth: Rostow and the distinct role of economic growth

Typifying the economic systems (II.)

Walter Eucken and the thinking in terms of a system: the morphological apparatus of the description of the ideal economic systems

Centrally planned economy and the barter economy

The distinct factor: the extent of the customer’s freedom

National Economies and the Global Economy

Cooperation and conflict

Selfishness and malevolence

Cooperation and selfishness

Envy and competition

Price, quantity, competition, cooperation: the contradictions of the enforcement of self-interest

The role of the time factor in the resolution of the prisoner's dilemma

Developed societies (market economies)

The frequency distribution of preferences

Benevolent

Neutral,Self-interested

Malevolent

Undeveloped societies (non-market economies)

The frequency distribution of preferences

Benevolent

Neutral

,Self-interested

Malevolent

State and market in modern capitalism

The development of private property

The family enterprise

The measurement of performance

The institution of unlimited liability

Governance/management and property

Owner and manager

Owner and manager

The softening of property rights

Limiting the special interest of the manager

Competition on the capital markets – the signaling role of stock prices

Competition on the product markets – (also) the evaluation of the managers’ performance

Competition on the market of managers – higher profitability higher managerial value

State sector in the modern market economy

Expansion and contraction

Market failures and nationalization

State failures and (re)privatization

Public goods – mixed goods – private goods

The State and the manager:

The danger of the softening up of the budgetary constraint

Contradicting owner

Which is the more efficient economic solution?

The general rule

Specific situation, specific actors, specific institutions, specific „playing-field”

The economic context of the political system

The role of the voters and the interest groups

The effects of the world market

The explanatory factors of the growth in state spending

Factors

EconomicWagner’s law (demand side)Baumol effect (supply side)

PoliticalThe theory of bureaucracyParty competitionInterest groupsVoters and fiscal illusionElection and party systems

Other factorsTax systemThe effect of the world market

Wagner’s law

The law predicts that the development of an industrial economy will be accompanied by an increased share of public expenditure in gross national product:

Industrialization – urbanization – negative effects – „over crowding effect” – state intervention

Historical and cultural differences: same level of development – different state intervention

The state budget can grow more under recession than under the circumstances of good economic performance

The Baumol effect

The productiveness growth of services < industrial productiveness (Two-sector model; under proportionate growth and same wage growth)

An increasing rate of social product and manpower is concentrating into services growth slows

The state plays a larger role in service sector the size of the state grows

The political system and the economy (I.)

The theory of bureaucracy: the waste of resources, because of the (individual rational) behavior of the members of the bureaucracy

Public welfare – individual interestThe goal of self-preservation builds into the

state administrationThe growth of the bureaucracy does not go

togther with the proporationate growth in the services provided by it.

The lack of the supply sanctionThe limits of monitoring the bureaucracy

The political system and the economy (II.)

Parties and public welfare vs. PowerVote maximizing public expendituresPublic expenditures and taxes: the inclination of

the political parties for income redistributionRational ignorance smaller state than

necessary (Downs, 1974)Present and future in the behavior of the voterGroup-specific public goods (Buchanan and

Tullock [1962]) excessive state spending

The political system and the economy (III.)

Interest groups (Olson [1997] the free riding phenomenon and the (negative and positive) selective incentives)

The competition of interest groups can either increase or decrease state spending

Partisan-politics hypothesis (Kohl, 1987) Ideological distance Fragmentedness or concentration The dynamics of coalition building: product bundling

State spending and the political leftSocial expenditures and the moderate right

The political system and the economy (IV.)

State structure centralism or federalismTax system: direct and indirect taxesInstitutional moment of inertiaThe effect of the world market

Open economies Industrial concentration Union concentration Collective bargaining Left-wing governments Increased in income supplementing spending The expansion of state spending

Contradictions

Keynesian economy (I.)

Regulations based on mass production and mass consumption

Mass production organizations amassing large sums of capital

Sensitivity to the changes in consumer incomeWages Demand ProfitWage bargainingDeficit financing and demand regulating state

interventionsInternational financial system (Bretton Woods)

Keynesian economy (II.)

The theory of social coalitionsThe culture, elasticity or rigidity of state

bureaucracyThe crisis of the Keynesian economic policyA move towards a liberalismThe disintegration of the social coalitionThe crisis of mass production (?)

The historical types of the capitalist economy

Competition and regulation Nationalization – privatization Regulation – deregulation

Losses created by the State > Losses created by the market

The mixed economic systems Market driven economy Negotiated economy State driven economy