Econ Class 6

**What are the differences between communism and socialism? Important for test**

In communism, the government owns everything. This is the most important aspect of communism. The government is also responsible for every productive aspect it must supply (?)

• Government owns all means of production
• Government owns everything
• There is no concept of a price mechanism
• No sense of competition, goods are allocated to individuals in society
  • Everyone gets the same goods
  • Due to no competition, quality is generally lower
• Goal is for equality for everyone, as enforced by the government
  • This is proven to be unlikely in communist states such as the Soviet union, where corruption is rampant.
  • Biggest weakness is inefficiency! In real world socialism, there are degrees of socialism.
• What aspects of Australia are socialist?
  • Quite a lot. The essential human goods and services are generally owned by the government, e.g. water corporation, western power etc.
    • However, these are under State jurisdiction. So these basic means of production aren't necessarily owned by the federal government, but by the state government
• Basic means of production are owned and managed by the government
  • In Australia, there is huge private sectors, with some regulation.
  • Private ownership, with regulation, of business
• Cooperation is more important than competition
  • Not in Australia. Competition is important, we want lowest price with highest quality.
• High standard of living and economic security
  • Contrasted with Socialism. In European countries (Norway), they pay a lot of tax.
• High taxes provide free health care and education
  • Medicare is socialised healthcare. In Australia, parents pay the medicare levy(3% of tax. income). Government sets price for every medical procedure available in Australia. The doctor can either charge the full price, or more. If they pay more, you pay the difference, but regardless, the government will pay you what the government has stated the price is.
  • Public hospitals come from state, and funded by both state and federal. When you go to hospital for healthcare, most of it is usually covered through medicare. e.g. cancer, however, this applies to everyone.
  • Private hospitals cost more, however the government will pay their share of it.
    • Britain has the NHS. It's essentially all public, in private hospitals, the government doesn't pay their share. However, in the public system the government will pay for essentially all of it.
  • Problem: People will use it. An overload of people will lead to problems.
    • Private system relies on people not being able to afford it.
  • Private health insurance:
    • Say we have 1mil people in society
    • Statistically, say 1k of these people will get ill (0.1%).
    • Average cost to fix people will be $1k per person ($1mil in total)
    • How to work out premium?
    • What this means, is that people pay a health insurance premium. It's what people pay to ensure they get health insurance.
    • Say everyone pays $1 dollar. Then the insurance can pay for everyone.
    • However, if more people get sick, say 4k people get ill now, that means everyone's premium goes to 4 dollar, and this escalates.
    • health insurance funds require healthy people to pay into the fund and not use it.
    • However, young people will start dropping out of the funds, as they have no need for it.
    • This leads to a rapid increase in the premium.
  • In Australian private health insurance, they made young people at the age of 30 and beyond, they will reduce their medicare levy.
  • If you get private health insurance by age 30, you will get discount on medicare.
    • Get private health insurance, reduce your tax.
  • When thinking about socialism, consider that free stuff means that government provides it through higher taxes.

Types of Economic Systems:

• Adam Smith promoted Cap
• Keynes didn't necesarily promote socialism, but believed in some aspects
• Karl Marx really liked communism.

Schools of economic thought:

• Classical Economics (Classical Political Economy)
• Keynesian Economics
• Supply side Economics
• Monetarism There are the only ones in the test.

They relate to the economic **thinkers**. Schools of thought come from their **philosophers**.

Things to look into later?

• Austrian School
• Behavioural Economics

Classical Economics

• Classical economic theory was brought into the mainstream by Scottish economist Adam Smith

  • Big thing: hated government interference in the market
    • Believed that market could sort out any problem

• Free trade good!! :)

• Coincided with the industrial revolution

• Many fundamental economic theories such as supply and demand, and price mechanism were a product of classical economics

• Understood price would result from supply and demand.

• In this era, industrialists would produce what they thought the people wanted with no government interference.

• Prior to the rise of classical economics, most economies were under the control of some type of monarch.

• Under these systems, the economy was tightly controlled by the state.

• If the King (or Queen) decides to raise your taxes, there is no one you can complain to

• Classical economics is the opposite of "command and control" systems and became associated with freedom.

• Feudal system was kinda communist??? There was no private entity.

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