The Efficiency of Different Economic Systems

Abstract

Comparisons between economic systems of various kinds — capitalistic, socialistic,economies based upon labor managed firms have played an important role in the economic debate, see e.g. Bergson (1971) and Grossman (1967). This interest was specifically active in connection with the great depression around 1930. The decline of production and employment led to demands for a greater degree of central direction and planning of the economies. When economic systems were compared, difficulties arose as to the meaning of an economic system. (E.g. is it more important what the relations between enterprises look like or is it more important how the enterprises are internally organized?) When economic systems are compared this has been done along several dimensions, e.g.

• (1) How ownership is distributed

• (2) How large economic liberty is

• (3) How the members of society are motivated

• (4) How the economic units are coordinated and how resource allocation is organized

• (5) Where different decisions are made in the economic system.