Economics 110 Spring 1997
Class #1: Introduction to the Course
Class #2: Basics of an Economic System
1. What is meant by "scarcity"?
2. What are the "factors of production"?
3. What are the three fundamental questions that every economy must answer?
4. We can organize economies according to ownership of capital. Using this,
a. what is "capitalism"? b. what is "socialism"? c. what is a "mixed economy"?
d. what is "social market capitalism"? e. what is "state-directed capitalism"?
5. What is meant by "ownership"?
6. What is "individualistic capitalism"? What is "commutarian capitalism"?
7. We can organize economies according to the type of decision-making. Using this,
a. what is a "market"? b. what is a "command economy"?
8. Briefly describe the collapse of communism and the problems of the transformation to
capitalism.
9. Name and describe the goals by which economies will be evaluated?
(Reading: Schnitzer, Chapter 1 Plus Handouts)
Class #3: Theoretical Market Capitalism
1. In the theory of market capitalism, what is assumed to be the basic nature of human beings (i.e., what is "economic man")?
2. What is meant by "individualism"? by "social Darwinism"? by the "Protestant Ethic"?
3. What is meant by "consumer sovereignty"?
4. What is meant by "private property"?
5. What is meant by "free enterprise"? More specifically, in the theory of market capitalism, what is meant by "freedom"?
6. Briefly describe the "invisible hand" argument of Adam Smith. From this, describe the benefits of a free market economy, assuming sufficient competition.
7. What is meant by "laissez faire"? Name the functions of government that are acceptable under laissez faire. Define the terms "public goods"and "externalities".
(Reading: Schnitzer, pages 25-35 Plus Handouts)
Class #4: Theoretical Market Capitalism
1. Explain why, in the theory of market capitalism, full-employment will be attained
automatically, without government intervention.
2. In the theory of market capitalism, how is the distribution of income determined?
(Consider both what determines people's wages and profits.)
3. In the theory of market capitalism, why should international trade between countries be free?
In this, show that you understand the Theory of Comparative Advantage.
4. In the theory of market capitalism, why does a market economy, free of government
interference, generate economic growth?
5. Overall, what are the strengths and weaknesses of a market, capitalist economy?
6. Briefly describe the historical development of capitalism.
(Reading: Schnitzer, Pages 35-47 Plus Handout --- Theoretical Market Capitalism)
Classes #5 and #6: The Ideology of Communism --- Marxism and Maoism
1. What is meant by the "dialectical approach"?
2. What is meant by "materialism"?
3. What is meant by the "mode of production"?
4. What is meant by "economic determinism"?
5. What is meant by "class"? What is the "bourgeousie"? What is the "proletariat"?
6. What is "class struggle"?
7. What is meant by "alienation"?
8. What is the "labor theory of value"? What is meant by "subsistence"?
What was the "iron law of wages"?
9. What is meant by "surplus value"? What is meant by "exploitation"?
10. What is the "reserve army of the unemployed"? Why does it exist?
11. What is meant by "increasing concentration of capital"? Why does it occur?
12. What is meant by the "contradictions of capitalism"? What are these?
13. What is the "law of increasing immiseration of the proletariat"? Why does it occur?
14. To Marx, why did capitalism create "the seeds of its own destruction"?
15. What did Marx mean by "crises"? Why do they occur? What is the "anarchy of the
market"? To Marx, why would "crises" become increasingly severe?
16. To Marx, what was the role of the "state" in a capitalist economy?
17. What is meant by "imperialism"? Why would it occur under capitalism?
18. According to Marx, why would there be a revolution under capitalism?
What was seen as the role of a communist party?
19. According to Marx, what would occur in the transition to communism? What is meant by
the "dictatorship of the proletariat"? Why does "the state wither away"?
20. Describe Marx's concept of the period of "communism".
21. What criticisms can be made of Marxist economic thinking?
22. Describe the basics of the ideology of Mao Zedong. How did it differ from Marx?
23. Briefly describe the historical development of socialism.
(Reading: Schnitzer, Pages 49-66 Plus Handouts on Marxism and Maoism )
Class #7: Introduction to the Basic Socialist Model
1. What was meant by the "Big Push"?
2. Briefly describe the organization of the Communist Party as it existed until 1988. What was the "nomenklatura"?
3. What is the "soft budget constraint"?
4. What are "co-operatives"?
5. What is "central planning"? What was the function of prices under central planning?
6. What are "black markets"?
7. Describe labor markets in socialist countries. In your answer, consider the movement of workers between jobs, wage differentials, the amount of unemployment, the role of labor unions, and the distribution of income.
8. What are "collective farms"? What was the purpose of collectivization?
9. What is meant by "autarky"? Why was it pursued in socialist countries?
(Reading: Schnitzer, Pages 66-75 Plus Handout --- Components of the Basic Socialist Model)
Class #8: Economic Planning Under Classical Socialism
1. What was the difference between the five-year plans and the annual plans in the former Soviet Union? What were the main priorities of the planners?
2. Briefly describe the planning procedures that were used in the Soviet Union. (See the Handout)
3. What was a "materials balance"?
4. What did it mean that "planning was taut"? In what ways were materials balances achieved?
5. What did it mean that "planning is done on the margin"?
6. For each enterprise, what were the categories for which quotas were given?
7. What was the role of the State Bank in enforcing the plans?
8. Name some strengths and weaknesses of Soviet-style economic planning.
9. In what ways was central planning in China different from that in the former Soviet Union?
(Reading, Handouts "Creation of the Annual Plan" and "Central Planning in China")
Class #9: Examination #1
Questions will be taken from the question sheet provided.
Class #10: Money, Prices, and Investment in the Classical Socialist Economy
1. What is meant by a "synthetic plan"?
2. What is meant by the "soft-budget constraint"? How does it operate?
3. Explain how industrial prices were set in the socialist countries.
4. Explain how retail prices were set in socialist countries.
5. What does the function of prices in socialist economic planning differ from that in
capitalist market economies?
6. What consumer goods were subsidized by the socialist governments?
7. Why were socialist prices considered "irrational"?
8. What is meant by "investment hunger"? Why does it occur?
9. What is meant by "investment tension"?
10. Explain why there were "growth cycles" in socialist countries. Why was there considerable expansion? Then, why were there austerity policies put into effect?
11. What is meant by the "shortage economy"? Why did it exist?
12. What is meant by a "monetary overhang" (forced savings)? What is its significance?
13. What was meant by the "second economy"? Explain, with some examples.
Class #11: The Enterprise Under Classical Socialism
1. How was the enterprise director chosen? What were the personal characteristics of those
who became directors?
2. What powers did enterprise directors have?
3. What were the main goals of enterprise directors?
4. How did directors overcome supply uncertainties of materials and parts?
5. Define: "expediter"; "storming"; "ratchet effect"; "vertical integration".
6. Why were enterprise directors resistant to change and innovation?
7. How were enterprise profits disposed of in the communist countries?
8. Explain the bonuses that directors received: how much were they? on what basis were they paid? What non-monetary rewards did directors receive? What resulted when directors failed to meet the quotas?
9. What is meant by "investment hunger"? Why did it exist? What is meant by "investment tension"? What problems did it cause?
10. Describe the "investment cycle" common in communist countries. How does it compare with the "business cycle" common in capitalist countries?
11. Explain how the labor force was incorporated into the central plan.
12. Explain how education was incorporated into the central plan.
13. Compare labor mobility (changing jobs) in the communist countries and the U.S.
14. Why were labor force participation rates high in the Soviet Union?
15. Compare the communist countries and the United States in relation to:
a. wage differentials b. unemployment c. working conditions
16. Compare the position of Soviet women in the labor force to that of American women.
17. What were the main differences between Soviet and American labor unions?
(Reading: Handout)
Class #12: Agriculture Under Classical Socialism
1. What are the functions that agriculture plays in the development of a less-developed country?
2. Explain the organization of a state farm.
3. Explain the organization of a collective farm.
4. Explain the organization of the Chinese commune.
5. What were the strengths and weaknesses of the commune system?
6. How did the collective farms or communes fit into central planning?
7. What was the role of private plots in Communist agriculture?
8. Present some evidence to evaluate the performance of agriculture in the former Soviet Union and in China in relation to the functions of agriculture listed in question 1.
9. What differences were there between agricultural organization in the former Soviet Union and in China prior to the reform period?
(Reading: Handouts)
Class #13: Economic Performance Under Classical Socialism
1. Briefly describe the economic growth rates of both communist countries. What is meant by "extensive growth"? by "intensive growth"? Consider GDP growth, GDP per capita, investment rates, and technology.
2. What is meant by "productivity"? What was the recent history in terms of productivity growth in both coutries? Were these economies successful at productive efficiency? at allocative efficiency? at dynamic efficiency?
3. How did the communist economies perform in terms of inflation, unemployment, and stability of growth?
4. Describe the standard of living in the communist countries. Consider the following:
a. GDP Per Capita e. Public Welfare
b. consumption per capita in total and of food, housing, and automobiles in particular
c. health care and education f. Environmental Disruption
d. the distribution of income and wealth g. Military Power
h. Economic Freedom
5. Briefly describe the rate of population growth of both countries and the policies each has had in regard to population problems. What was the "longer-later-fewer" campaign? What was the "single child family campaign"?
6. Overall, what have been the main successes of the Classical Socialist economic system? What have been its main failures?
(Reading: Mimeo, Handouts)
Class #14: The Road to Reform in the Former Soviet Union
1. Briefly describe the economic reforms that had taken place prior to 1985. Why had they not been successful?
2. Why was it felt that there was a need for restructuring (perestroika) in 1985?
3. Describe the policies of the beginning of perestroika, 1985 to 1987.
Why were these initiated? What is meant by "Glasnost"?
4. What were the main provisions of the 1987 Law on State Enterprise?
5. Describe the problems that resulted from the policies of perestroika during the period 1985 to 1989. In particular,
a. why did money incomes grow so fast?
b. why was there an investment cycle? what problem resulted from the
type of investment that was pursued?
c. why were there very high budget deficits?
d. why was there a large creation of new money?
e. why was there very high inflation as well as severe shortages food and other
consumer goods?
f. why was there a decline in overall production?
g. what other social problems resulted and why did they occur?
6. To what extent could the reforms taking-place in the Fromer Soviet Union in the period
1985 to 1989 be called "a shift to capitalism"?
7. Overall conclusion: why did the policies of perestroika from 1985 to
1990 fail to improve the Former Soviet economy?
8. Describe the debate that went on in the Former Soviet Union over the reforms of the
economy. In your answer, consider the opinions of the "conservatives", the "moderates",
and the "radicals".
9. Describe the proposals of the Shatalin Working Group (1990). Were these proposals
implemented by Gorbachev? Why or why not?
10. Why is reform so difficult in the Former Soviet Union?
11. Describe the debate ober reform between those who believe in "evolution" and those who
believe in "shock therapy".
(Reading: Handout)
Class #15: Reforms of Planning and the Enterprise in China: Evolution
1. Desccribe the main reforms of Chinese agriculture since 1978.
2. What was the "responsibility system"?
3. How have the functions of the commune been replaced.
4. What are the results of the reforms of Chinese agriculture? What problems have resulted?
5. Describe the main reforms to Chinese economic planning that have occurred. Why were
these reforms undertaken?
a. What is meant by "guidance planning"?
6. Describe the main reforms of the Chinese enterprise that have occurred. What is meant
by "tax for profit" or by "profit contracting"? Describe what it meants that "China
will grow out of the plan".
7. How has Chinese economic performance changed since the beginning of the reforms?
Consider both the benefits and the problems that have resulted because of the reforms.
8. What is meant by a "stop-go cycle"? Describe the cycle in China. Why did it occur?
9. Explain why China has had such high rates of inflation several times since the early 1980s.
How did the reforms contribute to this?
10.How have prices been reformed since 1978? Why was there NOT greater reform of the
price determination process?
11.What are the differences in the proposals of the "moderates" and the "radical reformers"?
(Reading: Handout)
Classes #16 and 17: International Economic Relations Under Classical Socialism
1. How was foreign trade organized in China prior to 1978?