TOPIC 4: Alternative Ways of Solving the Economic Problem:
Command versus the Market Pricing System
Question for Thought: What is the economic significance of Barack Obama’s election for President of the United States over John McCain?
Required Readings:
- Heilbroner, The Making of Economic Society, Chapter 1
- The Wall Street Journal
Additional Readings:
- Heilbroner, The Making of Economic Society, Chapters 2, 3, 11 & 14 (on reserve).
- Friedman and Friedman, Free to Choose, Chapter 1, esp. pp. 1-15 (on reserve).
- “The Modern Adam Smith,”, The Economist, July 14-20, 1990, pp. 11-12 (on reserve).
- R. A. Radford, “The Economic Organization of a P.O.W. Camp,” Economica, Vol. 12, 1945.
- Robert Heilbroner, The Worldly Philosophers, Chapter 3 (on reserve).
STUDY QUESTIONS FOR TOPIC 4:
- What are the different ways of organizing an economy to solve/deal with the economic problem?
- What are the advantages and disadvantages of each?
- How does a market economy solve the economic problem?
- How does this differ from a command economy?
- What are the functions of price in a market economy?
- Why does exchange take place?
- Who gains from exchange?
- If a product is simply traded from one individual to another, can there be a net gain to society?