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Flashcards covering key concepts related to economic systems, focusing on capital, socialism, and communism.
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Capital
A type of asset used to create goods or services, such as buildings, computers, and machinery.
Durable Good
A good used for at least three years, such as a car, which is used repeatedly.
Socialism
An economic system where capital assets are publicly owned and economic decisions are determined by a central planning board.
The Incentive Problem
The difficulty in rewarding state planners for serving people well within a socialist system.
The Knowledge Problem
The challenge faced by state planners in knowing how to best allocate resources in a socialist economy.
Communism
An economic system where there is no private property and everything is communally owned.
Means of Production
The facilities and resources for producing goods, which are ideally used to help others in a socialist economy.
F.A. Hayek
Nobel-winning economist who argued against applying micro-cosmos rules to macro-cosmos systems.
Public Ownership
Key aspect of socialism where the state owns the means of production.
Economic Decision Making
In socialism, this is determined by a central planning board based on social priorities.