Question

1. Read the short explanation of the 4 basic types of economies. Research two of these types further.

2. Locate one journal article for each of your two chosen economic types. You need to focus on the Abstract, Introduction, Results, and Conclusion. For our purposes, you are not expected to fully understand the Data and Methodology.

Answer 1

The four types of economies are:

1. The traditional economic system
2. Command Economic System
3. Market Economic System
4. Mixed Economic System

Here we’ll discuss in detail on Command Economic System and Market Economic System

Command Economic System

In a command economic system, a large part of the economic system is controlled by a centralized power. For example, in the USSR most decisions were made by the central government. This type of economy was the core of the communist philosophy.

Since the government is such a central feature of the economy, it is often involved in everything from planning to redistributing resources. A command economy is capable of creating a healthy supply of its resources, and it rewards its people with affordable prices. This capability also means that the government usually owns all the critical industries like utilities, aviation, and railroad

Market Economic System

In a free market economy, firms and households act in self-interest to determine how resources get allocated, what goods get produced and who buys the goods. This is opposite to how a command economy works, where the central government gets to keep the profits.

There is no government intervention in a pure market economy (“laissez-faire“). However, no truly free market economy exists in the world. For example, while America is a capitalist nation, our government still regulates (or attempts to control) fair trade, government programs, honest business, monopolies, etc.

Journal Articles

1. Profiting from government stakes in a command economy: Evidence from Chinese asset sales

Summary:

This examines the market response to an unexpected announcement of the sale of government-owned shares in China. In contrast to earlier work, there is a negative effect of government ownership on returns at the announcement date and a symmetric positive effect from the policy’s cancellation. The suggestion is that that this results from the absence of a Chinese political transition to accompany economic reforms, so that the benefits of political ties outweigh the efficiency costs of government shareholdings. Companies managed by former government officials have positive abnormal returns, suggesting that personal ties can substitute for government ownership as a source of connections.

Introduction

The effects on the market returns of partially privatized Chinese firms of announcements of proposed sales of remaining government shares is studied. There is a vast empirical and theoretical literature on the political economy of privatization. The empirical work in this area has emphasized the efficiency gains that come from privatization; almost uniformly, researchers have found that privately owned firms have higher measured profits and efficiency than government-run firms, both in the cross-section and also as a result of performance changes following public share offerings of government companies.

Conclusion

We find that the stock market responds negatively to unanticipated further privatization and positively to the cancellation of this proposed policy. We also find that, cross-sectionally, higher government ownership has a negative effect on firm returns during the privatization announcement, and a positive effect during the cancellation announcement. Our regression results suggest that government ownership is associated with benefits to government-connected firms in an economy like China’s where government continues to exercise substantial control over the economy. Our results indicate that, at least from the perspective of firm profitability, reduced government ownership is not always favorable

2. Research on the Market Economy Model

Summary:

In order to promote China’s market economy reform, it’s necessary to study existing market models. This paper researched on three current typical market economy models, and mainly used normative analysis approach and comparative analysis method. Through compare three different economy models, this paper found two differences may lead to the diversity of model; however, they still have three similarities in different model, and the paper concludes that there are some basic rules must be obeyed in market economy.

Introduction

Throughout history, every society has faced the fundamental economic problem of deciding what to produce and for whom, in limited resources. While market economies based on private enterprise, surpass command economies directed by a centralized government, for its flexibility and practically mechanism, which can auto-allocated the limited resources efficiently. According to different criterion, there are different market models. China is still in the primary stage of market economy, the market development in China is immature. Therefore, the study of different kinds of market economy models can help us to improve our market economy construction

Conclusion

China is carrying on the market economy reform now and had acquired a successful achievement. However, due to the market economy is from planned economy system change over, some problems appear in China. In the current legal incomplete condition, illegal phenomena are common, such as administrative monopoly and local protectionism, which against the basic principles of market economy. Business fraud and insufficient investment in public goods also restrict the normal development of the market. Market operation is not standard, and the market economy still needs further perfection in China. The comparative study of market economy model can help us understand the essence of market system.