Economics systems never lack in movement. They are persistently in transition, and alter as the history and culture of their people alter. They differ as government changes and as reformed theories/concepts of economic management conquer.
A Planned Economy differentiates from a Market Based Economy in several ways; it all comes down to ‘What to Produce’, ‘How to Produce’, and ‘For Whom To Produce’. In a planned economic system ‘What to Produce’ is determined and controlled by the Government, supposedly to benefit the country. In comparison to a Market Economic System, customers are seen as inferior as opposed to ‘scientific, medical and space research, and military production’; these are seen as first priority. In a Market Based Economy decisions are made ...view middle of the document...
Lastly, in a Planned Economy, ‘For Whom To Produce’ the governments planning bureau controls wages, meaning no extra pay for working overtime. In a Market Economy, ‘For Whom To Produce’ the individuals income determines the share of the economy’s production of goods and services that they or their household receives.
Examples of transition processes in economies, e.g. transition from planned to market economy, include the Economic Reform e.g. decisions to pursue a new economic theory, Political change, the Economic Theory, and Globalization. There have been significant benefits of transition, although the costs of transitions may outweigh the benefits, the benefits have helped economies improve dramatically.
These include decreased price inflation resulting in prices reducing dramatically, Rapid economic growth and decreased unemployment. Negative impacts of economies that have gone through transition processes include ‘central economic planning being abruptly and unexpectedly dropped in 1991’ , entrepreneurial skills lacking, consumers/producers were not prepared to react to market signals and the unfamiliar system of distributing goods and services was at first incompetent and unproductive, some had more resources compared to others, inflation rate of general/standard level of prices was dramatically increased and they increased quite hasty as demand for goods and services grew faster than the production was keeping up. There was also growth in the rate of unemployment, meaning no longer assurance of employment for majority of people looking for a job; income inequality became a more protuberant feature as income was then dependent on the value of the resources owned, lastly, ‘the CIS suffered an economic crisis and the crime rate ascended and corruption/manipulation was ineffectively controlled.