Compare the two ideal-type political economies in terms of control of factors of production, production decisions, determination of value, distribution decisions, and the role of the state.

Question

What will be an ideal response?

Answer 1

The ideal answer should include:
1. We can distinguish two ideal-type political economies: market economy and command economy. These can be thought of as two ends of a spectrum.
2. Market economy is characterized by the following: a) factors of production are controlled by private individuals, b) productions decisions are made by private actors who try to maximize their utilities, c) the market determines the value of goods and services, d) distribution is based on a summation of the actions of all consumers and producers in the market, and e) the state is minimally engaged in the political economy.
3. Command economy is characterized by the following: a) the state owns all significant factors of production and creates a plan that specifies what will be produced, b) the state determines the value of goods and services and decides who will receive these goods and in what amount, and c) the state dominates the political economy.