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Welcome to Keith's night, don't 
tread on anyone. 

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This is an excerpt from basic 
economics by Thomas Soul. 

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The contrast between the Soviet 
economy and the economies of 

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Japan and Germany is just one of
the many that can be made 

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between economic systems, which 
use prices to allocate resources

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and Mills, which have relied on 
political or bureaucratic 

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control in other regions of the 
world as well. 

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And in other political systems, 
there have been similar 

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contrasts between places that 
used prices to ration goods and 

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allocate resources versus places
that have relied on hereditary 

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rulers elected officials or 
appointed planning commission's.

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While many African colonies 
achieve National Independence in

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the 1960s, a famous bet was made
between the president of Ghana. 

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And the president of the 
neighbouring Ivory Coast as to, 

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which country would be more 
prosperous in the years ahead. 

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At that time. 
Ghana was not only more 

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prosperous than the Ivory Coast,
it had more natural resources. 

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So the BET might have seemed 
Reckless on the part of the 

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president of the Ivory Coast. 
However, he knew that Ghana was 

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committed to a government-run 
economy and the Ivory Coast to a

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free market by 1982. 
The Ivory Coast had so surpassed

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gonna economically that the 
poorest 20% of its people at a 

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higher real income. 
Or capita than most of the 

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people in Ghana. 
This could not be attributed to 

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any superiority of the country 
or its people. 

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In fact, in later years when the
government of the Ivory Coast, 

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eventually succumbed to the 
temptation to control more of 

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their country's economy while 
Ghana finally learn from its 

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mistakes and began to loosen 
government controls on the 

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market, these two countries 
roles reversed and now Ghana's 

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economy began to grow So, while 
that of the Ivory Coast 

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declined, similar comparisons 
could be made between Burma and 

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Thailand. 
The former having had the higher

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standard of living before 
instituting socialism and the 

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latter Thailand, a much higher 
standard of living afterwards, 

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other countries, India, Germany,
China, New Zealand, South Korea,

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Sri Lanka have experienced sharp
up turns in their economies. 

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They freed those condom. 
He's from many government 

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controls and relied, more on 
prices to allocate resources as 

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of 1960. 
India and South Korea were at 

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comparable economic levels. 
But by the late 1980s, South 

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Korea's per capita income was 10
times that of India, India 

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remain remains committed to a 
government controlled economy 

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for many years after achieving 
independence in 1947, however, 

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in the 1990s, India jettisoned, 
for decades of economic 

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isolation, and planning and 
freed the country's 

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entrepreneurs, for the first 
time since Independence, in the 

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words of the distinguished 
London magazine, The Economist 

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there, followed a net growth of 
6% a year, making it one of 

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World's fastest-growing big 
condom. 

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He's from 1950 to 1990 India's 
average growth rate had been 2% 

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the cumulative effect of growing
three times as fast as before, 

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was that millions of Indians 
rose out of poverty in China, 

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the transition to a market 
economy, began earlier in the 

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1980s. 
Government controls were at 

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first relaxed on an Mira mental 
basis in particular, economic 

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sectors. 
And in particular, geographical 

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regions earlier than others, 
this led to stunning economic 

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contrast within the same country
as well as rapid economic 

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growth. 
Overall back in 1978 less than 

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10 percent of China's. 
Agricultural output was sold in 

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open markets instead of being 
turned over to the government 

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for distribution but by 1990 
80%, Was sold directly into the 

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market. 
The net result was more food and

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a greater variety of food 
available to City dwellers, in 

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China and arise and Farmers 
income by more than 50 percent. 

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Within a few years in contrast 
to China's severe economic 

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problems. 
When there was heavy-handed 

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government control under Mao who
died in 1976, the subsequent 

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freeing up of prices in The 
Market Place LED To an 

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astonishing economic growth of 
9% per year, between 1978 and 

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1995. 
While history can tell us that 

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such things happened. 
Economics helps explain why they

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happened. 
Whatever is about prices that 

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allows them to accomplish what 
political control of an economy.

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Can seldom match, there was more
to economics than prices but 

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understanding how prices 
function is the foundation for 

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understanding, much of the rest 
of Economics, a rationally 

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planned economy, sounds more 
plausible than an economy 

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coordinated, only by prices 
linking millions of separate 

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Decisions by individuals and 
organizations. 

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Yet, Soviet economists who saw 
the actual consequences of a 

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centrally planned economy which 
very different conclusions. 

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Namely quote, there are far too 
many economic relationships and 

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it is impossible to take them 
all into account and coordinate 

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them sensibly. 
Knowledge is one of the most 

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scarce of all resources and a 
pricing system economizes on its

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use by forcing those with the 
most knowledge of their own 

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particular situation to make 
bids for goods and resources, 

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based on that knowledge, rather 
than on their ability to 

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influence other people. 
In planning commission's, 

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legislators or Royal palaces 
however, much articulation I may

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be valued by intellectuals. 
It is not nearly as efficient, a

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way of conveying accurate 
information, as confronting 

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people with a need to quote, put
your money, where your mouth is 

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that forces them to summon up 
their most accurate information 

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rather than their most plausible
words. 

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Human beings are going to make 
mistakes in any kind of economic

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system. 
The question is, what kinds of 

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incentives and constraints will 
force them to correct their own 

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mistakes in a price coordinated 
economy. 

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Any producer who uses 
ingredients, which are more 

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valuable elsewhere in the 
economy is likely to discover 

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that the cost of those 
ingredients cannot be repaid 

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from what the customers are 
willing to pay for the product 

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after On the producer, has had 
to bid those resources away from

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alternative users, paying more 
than the resources are worth. 

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Just some of those alternative 
users. 

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If it turns out that, these 
resources are not more valuable 

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in the uses to which this 
producer puts them, then he is 

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going to lose money, there will 
be no choice but to discontinue 

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making that product with those 
ingredients. 

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For those producers who are too 
blind or too stubborn to change.

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Continuing losses will force 
their business into bankruptcy. 

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So that the waste of the 
resources available to the 

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society will be stopped that 
way. 

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This is why losses are just as 
important as profits from the 

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standpoint of the economy, even 
though losses are not nearly as 

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popular with businesses. 
In a price coordinated, economy,

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employees and creditors insist 
on being paid regardless of 

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whether the managers and owners 
have made mistakes. 

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This means that capitalist 
businesses can make only so many

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mistakes for so long before they
have to either stop or get 

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stopped. 
Whether by an inability, to get 

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labor and supplies. 
They need or by bankruptcy in a 

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feudal economy or a. 
So, socialist economy leaders 

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can continue to make the same 
mistakes that definitely the 

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consequences are paid by others 
in the form of a standard of 

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living lower than it would have 
been if there were greater 

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efficiency in the use of scarce 
resources, in the absence of 

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compelling price signals and the
threat of financial losses to 

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the producers that they convey 
inefficiency and waste in the 

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Soviet Union could continue 
until such time as Each 

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particular instance of waste 
reached proportions, big enough 

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and blatant enough to attract 
the attention of central 

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planners and Moscow who were 
preoccupied with thousands of 

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others of decisions. 
Ironically the problems caused 

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by trying to run an economy by 
direct orders or by arbitrarily 

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imposed in post-crisis, created 
by government Fiat or forcing in

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the 19th century by Karl, Marx, 
and Angles, whose ideas the 

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Soviet Union claimed to be 
following angles pointed out 

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that price fluctuations have 
quote forcibly, brought home, 

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the individual commodity 
producers what things and what 

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quantity of them Society 
requires or does not require and

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quote, without such a mechanism,
he demanded to know quote, what 

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guarantee do we have that 
necessary, quantity and not much

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more of each. 
I liked will be produced that we

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shall not go hungry in regard to
corn and meat while we are, 

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choked in beet sugar. 
And drowned in potato spirit 

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that we shall not lack trousers,
to cover our nakedness. 

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Well trouser buttons, flood Us 
in the millions, in quote marks 

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and angles, apparently, 
understood economics much better

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than their Latter-Day followers 
or perhaps, Marx and Engels were

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more concerned with Economic 
efficiency than with maintaining

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political control from the top. 
There were also Soviet 

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economists who understood the 
role of price fluctuations in 

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coordinating. 
Any economy near the end of the 

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Soviet Union, two of these 
economists shall live and pop of

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whom we have already. 
Quoted said quote everything is 

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interconnected in the world of 
prices so that the smallest 

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change in one element is passed 
along to the chain. 

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Of millions of others. 
These Soviet economists, were 

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especially aware of the role of 
prices from having seen what 

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happened when prices were not 
allowed to perform that role but

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economists were not in charge of
the Soviet economy. 

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Political leaders were under 
Stalin, a number of economists 

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were shot for saying things. 
He did not want to hear next 

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section supply and demand there 
is perhaps no more basic or more

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obvious principle. 
Of Economics than the fact that 

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people tend to buy more at a 
lower price and less at a higher

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price. 
By the same token people who 

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produce Goods or Supply Services
tend to supply more at a higher 

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price and less at a lower price.
Yet the implications of these 

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two simple principles Singly or 
in combination, cover a 

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remarkable range of economic 
activities and issues and 

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contradict and equally 
remarkable range of 

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misconceptions. 
And fallacies, thank you for 

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watching Keith Knight don't 
tread on anyone and the 

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libertarian Institute.