NP-1k-short

Unit 3.TYPES OF ECONOMIC SYSTEMS

TEXT A: Types of economic systems TEXT B: Command economy

TEXT C: Good (and bad) models

BUSINESS COMMUNICATION: Finding the way

GRAMMAR: Past Tenses. The Past Simple and the Past Continuous Tenses

Diversity in the world is a basic characteristic of human society, and also the key condition for a lively and dynamic world as we see today.

Jina to Hu, President of the People's Republic of China

LEAD-IN

1.What is the most typical problem faced by every society?

2.Why cannot people have everything they want?

3.Who usually allocates resources in the country?

4.How can the economic system influence our life?

PRE-TEXT EXERCISES

A. Reading drills

Ex.1. Practice reading the following words:

ch [k] mechanism, mechanic, mechanization, technique, technical (в словах,

запозичених з грецькоїмови)

ph [f] phrase, phase, photograph, telephone, phonetics (в словах, запозичених з грецькоїмови)

61

er, ir, ur [з:] refer, prefer, sir, girl, term, perfect, third, merger, university, burn, nurse, curse

ture [ʧə] structure, picture, venture, gesture, mixture, lecture, nature sure[ʒə] measure,pleasure, leisure

Ex.2. Read the following words. The underlined letters are silent.

Bomb, comb, lamb, debt, write, know, knife, doubt, receipt, psychology.

Ex.3. Read the words in the group below. Pay attention to the word stress. a) words with the stress on the first syllable:

several, scarcity, allocate, previously, Asia, clothing, value, major, centrally, formulate, publicly, industries, socialism, socialist, Sweden, power, operate, ownership, relevant, enterprise, government, centralized,social, ownership;

b) words with the stress on the second syllable:

requires, essential, dilemma,referred,efficiently, appearance, variety, societies, command,allow, consumer, percent, consensus, municipal;

c) polysyllabic words with the main and secondary stress:

satisfactorily, opportunity, distribution, independently, intermingled, intervention, environmentalism.

B. Word formation

Ex.4. Make up nouns as in the model.

Model: noun + suffix –ship →noun e.g. owner – ownership

Citizen, dictator, friend, leader, member, proprietor, entrepreneur, master. Model: verb +suffix –tion or –sion →noun

e.g.organizeorganization

Protect, decide, define, produce, collect, reduce, consume, divide, cooperate. Model: noun +suffix-ism →noun

e.g. material-materialism

Marx, Protestant, Buddha, commune, society, capital, consumer, perfection.

Ex.5. Make up adjectives as in the model.

Model: adjective +suffix -ance or -ence (- ancy, -ency) →noun e.g.efficient - efficiency

Important, different, insistent, resistant, constant, efficient, intelligent. Model: noun +suffix -ic →adjective

e.g. economyeconomic

History, geography, hero, science, ballast, naturalist, metal, poet, myth.

What other noun or adjective suffixes do you know? Give examples.

TEXT A: TYPES OF ECONOMIC SYSTEMS

Active Vocabulary

62

Key terms: traditional economy, market economy, command economy, mixed economy, centrally planned economy, to levy taxation, means of production, production and distribution, shortage and surplus, free enterprise, laissez-fair.

Other words and expressions: a mechanism for survival, to resolve the problems, to store, scarcity problem, to do for a living, to provide a sense of security and psychological comfort, to take advantage of, essential dilemma, to exercise economic functions, to control prices, essential features, to open and run any kind of business, to be intended, to divide up into, in the marketplace, privately owned, to depend on, to manage the economy, an extensive form, to detect consumer preferences, sufficient accuracy, social welfare, decision maker, health insurance, housing projects, free medical services, range from … to, to be owned and operated by.

Linking words and phrases: if we look at, in fact, subsequently, to refer to, according to, thus, strictly speaking, however, what is more, as we have classified, to sum up.

To an economist, economic society presents itself as a mechanism for survival — a means whereby people are able to carry out the tasks of production and distribution. If we look at the different political and social structures which exist in the world today, and the way in which those systems have developed over the years, we are tempted to saythat people have made use of, and are making use of, very great varieties of economic systems. In fact, in spite of the appearance of great variety, it is possible to group these different economic structures into four broad categories. These basic types of economic organization are usually described as Traditional economies, Market economies, Command economies and Mixed economies. There are several basic and unfinished questions that must be answered in order to resolve the problems of economics satisfactorily. The scarcity problem, for example, requires answers to basic questions, such as: what to produce, how to produce it, and who gets what is produced. An economic system is a way of answering these basic questions. Different economic systems answer them in a different way.

Traditional Economic System

Theoldestanduntil recent times the most common way of solving economic problems was that of tradition. In traditional societies, people use methods of production and distribution that were devised in the distant past and which have become an accepted way of doing things by a long process of trial and error.

A traditional economic system is one in which people's economic roles are the same as those of their parents and grandparents. Societies that produce goods and services in traditional ways are found today in some parts of South America, Asia, and Africa. There, people living in an agricultural village still plant and harvest their own food on their own land. And the ways they produce clothing and shelter are almost exactly the same as those used in the past. Tradition decides what these people do for a living and how their work is

63

performed. Traditional economy provides a sense of security and psychological comfort. Subsequently, there is a relatively low unemployment rate and low crime rate. A traditional economy allows for a greater degree of autonomy and little or no money is used.

A traditional economy does not allow for much economic growth and development as changes are very slow and there is little social mobility. A traditional economy does not take advantage of technology and there is relatively little promotion of intellectual and scientific development. A traditional economy provides few incentives for entrepreneurs, thus limiting choices for consumers and lowering standards of living.

Market Economic System

A market economic system is one in which a nation's economic decisions are the result of individual decisions by buyers and sellers in the marketplace. The market system of economic organization is also commonly described as a free enterprise or laissez-faire, or capitalist system. We shall use all these terms to stand for a market economy. Strictly speaking, the pure market of laissez-faire system has never existed. Whenever there has been some form of political organization, the political authority has exercised some economic functions (e.g. controlling prices or levying taxation). Efficiency is best achieved through a market economy where individual producers each make their own production decisions based on their own profit motive. Some critics of the free-market argue that property rights are in conflict with "human" rights. But the critics fail to realize that in a free-market system, every person has a property right over his own person and his own labor, and that he can make free contracts for those services.

The framework of a market or capitalist system contains six essential features. They are:

1. private property

2.freedom of choice and enterprise

3.self-interest as the dominating motive

4.competition

5.a reliance on the price system

6.a very limited role for government.

Command Economic System

A planned economy or directed economy is an economic system in which the state or government manages the economy. Its most extensive form is referred to as a command economy,centrally planned economy, or command and control economy. In such economies, the state or government controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income, much like a communist state. The planners decide what should be produced and direct enterprises to produce those goods.

In a command economic system, the main decision maker is the government. No person may independently decide to open and run any kind of business. The government decides what goods and services are to be produced. And the government sells these goods and services. The government also decides how the talents and skills of its workers are to be used. Supporters of planned

64

economies cast them as a practical measure to ensure the production of necessary goods. Critics of planned economies argue that planners cannot detect consumer preferences, shortages, and surpluses with sufficient accuracy and thereforecannot efficiently co-ordinate production (in a market economy, a free price system is intended to serve this purpose). Planned economies are notoriously corrupt. Their inefficiency leads to the formation of informal social networks.

Mixed Economic System

No country has an economic system that is 100 percent communism, socialism, or capitalism. All countries today have mixed economic systems or mixed economies, with some free enterprise and some government ownership. There is not one single definition for a mixed economy, but relevant aspects include: a degree of private economic freedom(including privately owned industry) intermingled with centralized economic planning(which may include intervention for environmentalism and social welfare, or state ownership of some of the means of production).

For some states, there is no consensus on whether they are capitalist, socialist, or mixed economies. Economies in states ranging from the United States to Cuba have been termed mixed economies.

If the government owns and operates almost all of the nation's means of production, then that nation's economic system is called communism. China has a communist economic system. Almost all of the means of production are publicly owned-that is, owned by the government. Government planners decide the answers to the basic economic questions. Farming on private plots of land is sometimes allowed. In recent years, the Chinese government has been allowing more and more private businesses to operate.

If the government owns and operates many of the nation's major industries-such as banks, airlines, railroads, and power plants-but allows individuals to own other businesses, including stores, farms, and factories, that nation's economic system is called socialism.

Sweden is an example of a country whose economic system is often described as socialist. Most of its major industries, such as coal mining, electric power, gas, telephone, and railroads, are owned by the government. Under Sweden's national health insurance system, the people receive free medical services all their lives.

If almost all the stores, factories, and farms in a nation are owned and operated by private individuals or businesses, then its system is called free enterprise, or capitalism. The U.S. has a free enterprise, or capitalist, economic system.

Language notes:

we are tempted to say – ми схиляємось до ствердження того, що…

a long process of trial and error– довгий процес випробування та помилок

the pure market of laissez-faire system has never existed – чистий ринок системи невтручання уряду ніколи не існував

65

how the talents and skills are to be used –як слід використовувати таланти та навички

a degree of private economic freedom intermingled with centralized economic planning – ступінь особистої економічної свободи змішана з централізованим економічним плануванням

VOCABULARY FOCUS

Ex.1. Find the English equivalents in the text.

Засіб для виживання; виконувати завданнявиробництватарозподілу; не зважаючи на виникнення великої різноманітності; для того, щоб вирішити економічну проблему; почуття безпеки та психологічного комфорту;братидоуваги; обмежувативибірспоживачів; вільнепідприємництво; досягтиефективності; критикинеможутьзрозуміти; визначити з достатньою точністю; створення неформальної соціальної мережі; надавати дозвіл на ведення приватного бізнесу; контролювати основні сектори економіки; чистий ринок; характерні риси; структура ринкової системи; незалежно вирішувати; керувати основними галузями промисловості; отримуватибезкоштовнімедичніпослуги.

Ex.2. Give Ukrainian equivalents for the following phrases.

To present itself as; to be tempted to say; in spite of; to come into play; the essential dilemma; production and distribution; to take advantage of; to solve economic problems; to do for a living; a sense of security and psychological comfort; a greater degree of autonomy; incentives for entrepreneurs; to stand for a market economy; the dominating motive; to formulate decisions; to direct enterprises; relevant aspects; intermingled with; to be notoriously corrupt; consumer preferences, shortages and surpluses; to reach a consensus on;fail to realize.

Ex.3. Give three forms of the following verbs. Find the sentences with these verbs in the text.

Deal, make, say, come, cost, choose, see, do, find, speak, be, sell.

Ex.4.Make up adjective +noun or noun +noun collocations (there may be several variants). Give examples either from the text or of your own.

Economic, basic, scientific, profit, free, private, decision, government, scarcity.

Problem, property, system, development, enterprise, questions, motive, maker, ownership.

Model:economic system

e.g. People have made use of a variety of economic systems.

Ex.5. Match up the words on the left with the definitions on the right.

1

aneconomicsystem

a

economy, with some free enterprise and

66

					some government ownership
2	a	traditional	economic	b	an economic system in which the state or
	system				government manages the economy
3	a	market	economic	c	also commonly described as a free
	system				enterprise or capitalist system
4	a	planned economy or		d	one in which people's economic roles are
	directed economy				the same as those of their parents and
					grandparents
5	mixed economic system			e	one in which a nation's economic
					decisions are the result of individual
					decisions made by buyers and sellers in
					the marketplace
6	laissez-faire			f	a way of answering three basic
					questions:what, how and for whom to
					produce

Ex.6. Choose an appropriate word or a phrase to complete the following sentences.

Decision maker, a mechanism, traditional, basic and unfinished, in the distant past, a free enterprise or laissez-faire, a sense of security, owned and operated, government, in spite of.

1.To an economist, economic society presents itself as __________ for survival.

2.In fact, __________ the appearance of great variety, it is possible to group these different economic structures into four broad categories.

3.In traditional societies people use methods of production and distribution devised __________.

4.A __________ economy does not allow for much economic growth and development as changes are very slow and there is little social mobility.

5.The market system of economic organization is also commonly described as

__________, or capitalist system.

6.Traditional economy provides __________ and psychological comfort.

7.In a command economic system, the main __________ is the government.

8.All countries today have mixed economic systems or mixed economies, with some free enterprise and some __________ ownership.

9.Government planners decide the answers to the __________ questions.

10.If almost all the stores, factories, and farms in a nation are __________ by private individuals or businesses, then its system is called free enterprise.

Ex.7. Complete the following sentences with prepositions.

1. _____ an economist, economic society presents itself as a mechanism _____

survival.

67

2.If we look _____ the different political and social structures which exist in the world today, we are tempted to say that people have made use _____ , and are making use _____ , very great varieties _____ economic systems.

3.Tradition decides what these people do _____ a living and how their work is performed.

4.A traditional economy does not allow _____ much economic growth and development.

5.We shall use all these terms to stand _____ a market economy.

6.Every person has a property right _____ his own person and his own labor, and that he can make free contracts _____ those services.

7.Its most extensive form is referred _____ as a command economy.

8.Each nation and society thus must make choices and decisions based _____

their own values.

9.There is not one single definition _____ a mixed economy.

10.Economies _____ states ranging _____ the United States _____ Cuba have been termed mixed economies.

Ex.8. Combine two parts logically to make a complete sentence.

1

If we look at the different

a

where

individual producers each

political and social structures

make

their

own

production

which exist in the world

decisions based on their own profit

today, the years,

motive.

2

There are several basic and

b

capitalist,

socialist,

or

mixed

unfinished questions

economies.

3

Efficiency is

best

achieved

c

then that nation's economic system

through a market economy

is called communism.

4

Supporters

of

planned

d

we are tempted to say that people

economies cast them as

have made use of, and are making

use of, very great varieties of

economic systems.

5

For some states, there is no

e

few

incentives

for entrepreneurs,

consensus on

whether they

thus

limiting

choices

for

are

consumers.

6

If the government owns and

f

that in a free-market system, every

operates almost all of the

person has a property right over

nation's means of production,

his own person and his own

labour.

7

A

traditional

economy

g

is

100

percent

communism,

provides

socialism or capitalism.

8

The critics fail to realize

h

have

been

termed

mixed

economies.

9

No country has an economic

i

a practical measure to ensure the

system that

production of necessary goods.

68

10	Economics in states ranging	j	that must be answered in order to
	from the USA to Cuba		resolve	the	problems	of
			economics.

Ex.9. Look through the text again and replace the words /phrases in italics with similar ones.

1.The problem of insufficiency requires answers to questions “What to produce?” “How to produce?” and “Who gets what is produced?”

2.In a traditional economic system tradition decides how peopleearn their daily bread.

3.A traditional economy doesn’t make good use of technology and there is relatively little promotion of intellectual and scientific development.

4.The market system of economic organization is described as economic activity undertaken by private individuals or organizations under private ownership.

5.The political authority has performed some economic functions.

6.The framework of a market system contains six major traits.

7.In a command economy no individual may independently set up and manage commercial activity.

8.Critics of command economy argue that planners cannot determine consumers’ likes.

9.Planned economies have a bad reputation to act dishonestly in return for money or personal gain.

10.In mixed economic systems intervention of government may include well- being of people and protection of the environment.

Ex.10. Translate into English:

1.Економічнесуспільство є засобом для виживання, де люди мають змогу виконувати завдання виробництва та розподілу.

2.Економічна система - це спосіб відповіді на основні економічні питання – що, як та для кого виробляти.

3.Проблема дефіциту потребує відповіді на питання, такі як:що виробляти, як виробляти, та хто отримає те, що було вироблено.

4.Традиції вирішують, як люди заробляють на життя та як виконується їх робота.

5.У традиційній економічній системі люди виробляють товари та послуги методами, які були винайдені в далекому минулому.

6.В ринковій економічній системі всі питання з виробництва та розподілу вирішують покупці та продавці на ринку.

7.В адмістративно-командній економічній системі держава та уряд контролюють основні сектори економіки.

8.Структура ринкової економіки має шість характерних рис.

9.Немає жодної країни, що має чисту економічну систему, яка на 100 відсотків є традиційною, адміністративно-командною, чи ринковою.

10.Майже всіма засобами виробництва в країні з командною економічною системою володіє уряд.

69

LANGUAGE SKILLS

Ex.11. Ask questions to which the following sentences may be answers.

1.As a mechanism for survival.

2.It is possible to group these different economic structures into four broad categories.

3.The oldest and the most common way of solving economic problems was that of tradition.

4.Strictly speaking, the pure market of laissez-faire system has never existed.

5.Supporters of planned economies cast them as a practical measure to ensure the production of necessary goods.

6.Efficiency is best achieved through a market economy where individual producers each make their own production decisions based on their own profit motive.

7.All countries today have mixed economic systems or mixed economies, with some free enterprise and some government ownership.

8.Economies in states ranging from the United States to Cuba have been termed mixed economies.

9.If the government owns and operates almost all of the nation's means of production, then that nation's economic system is called communism.

10.The U.S. has a free enterprise, or capitalist, economic system.

Ex.12. Answer the questions:

1.How does every economic society present itself for an economist?

2.What are the basic types of economic systems?

3.What kind of questions may help to solve economic problems satisfactorily?

4.Why does every society face the problem of resource allocation?

5.What methods of production and distribution are used in a traditional economic system?

6.Describe advantages and disadvantages of traditional economies.

7.Who makes economic decisions in a market economic system?

8.	List six essential features of a market economy.

9.Describe the role of government in a planned economy.

10.What are disadvantages of planned economies?

11.Define a mixed economic system.

12.What is the fourth basic question that should be asked by every society?

13.Who owns the means of production in the discussed economic system?

Ex.13. Make a presentation of the topic “Types of Economic systems”.

WRITING

Ex.14. Make a plan for a summary of Text A.

70