Comparative economics in a transforming world economy 2nd edition

#7198951 11/18/03

COMPARATIVE ECONOMICS IN A TRANSFORMING WORLD ECONOMY

J. BARKLEY ROSSER, JR., and MARINA V. ROSSER

COMPARATIVE ECONOMICS IN A TRANSFORMING WORLD ECONOMY Second Edition J. BARKLEY ROSSER, JR., and MARINA V. ROSSER

This second edition of an innovative undergraduate text offers an approach to understanding different economic systems that reflects both recent transformations in the world economy and recent changes in the field of comparative economic systems. The traditional way of teaching comparative economics, with its reliance on relatively simple dichotomies (pri- vate vs. state, planning vs. market) does not take into consideration the many variants and mixtures of economic systems that exist in the real world. The Rossers’ introduction in the first edition of the concept of the “new traditional econo- my”—the effort by a developing country to embed a modern economic system into a traditional culture, usually religion- based—presented a new way to look at developing economies. Their innovative examination of Iran and its effort to develop a “revolutionary Islamic economy” as an alternative to market capitalism illustrates the use of this new tool in comparative economics.

After a four-chapter theoretical and historical overview, the book focuses on fifteen country studies, organized by economic system. The chapters on advanced market capitalism examine the economies of the United States (a chapter new to this edition), Japan, France, Sweden, and Germany. The chapters examining transition in former socialist economies discuss Russia, the former Soviet Republics, Poland, Hungary, Yugoslavia (including expanded treatment of the most successful transition economy, that of Slovenia), and China. The chapters in the final section of the book dis- cuss “alternative paths” taken by the developing economies of Iran, India (its complex mix of socialism, capitalism, and tradition is examined in a chapter new to this edition), Mexico, and South and North Korea. The book concludes with a look at future trends that will continue to transform the world economy.

J. Barkley Rosser, Jr., and Marina V. Rosser are Professors of Economics at James Madison University.

“Rosser and Rosser’s wide-ranging book provides an engrossing and up-to-date introduction, not just to capitalism and socialism in their various forms, but also to the ‘new traditionalism,’ as found in such countries as Iran. Their emphasis on the political and religious factors complementing particular economic forces in shaping economic institutions is par- ticularly insightful.” —Frederic L. Pryor, Senior Research Scholar, Swarthmore College

“With the fall of the Soviet Union, the cold war debate on socialism vs. capitalism is out, and the discourse on the systemic approach to public policy is in. Barkley and Marina Rosser’s presentation of the mosaic of world economic systems is the- oretically rigorous and factually interesting. It challenges students analytically and offers them a new vantage point for examining the complexities of our societies. It is an attractive textbook, and a good read!” —Sohrab Behdad, Professor and John E. Harris Chair in Economics, Denison University

“With the collapse of communism, economics has struggled to redefine itself and find a new direction. In this book the Rossers push for an economics that is exceedingly relevant for understanding the ongoing changes in the global econo- my. They weave together theory and history to explain socialism’s origins, inner workings, collapse, and transformation, as well as alternative paths in Western Europe and Asia. I highly recommend this book for undergraduate and graduate courses in comparative economic systems and political economy.” —Peter J. Boettke, Deputy Director, James M. Buchanan Center for Political Economy, George Mason University

“This text is an outstanding achievement in a field that has been in flux since the epochal changes in Russia and Eastern Europe. The authors demonstrate the continuing relevance of the comparative-systems approach by illustrating the extraordinary diversity in contemporary societies, from the market socialism of China to the worker-managed socialism of Slovenia to the new social arrangements in ‘traditional’ societies such as Iran. This is an important text that greatly improves the choices for systems courses.” —Satyananda J. Gabriel, Department of Economics, Mount Holyoke College

Cover art: M. C. Escher’s Day and Night © 2003 Cordon Art B. V. - Baarn - Holland. All rights reserved.

The MIT Press Massachusetts Institute of Technology Cambridge, Massachusetts 02142 http://mitpress.mit.edu 0-262-68153-6

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Comparative Economics in a Transforming World Economy

Comparative Economics in a Transforming World Economy

Second Edition

J. Barkley Rosser, Jr. Marina V. Rosser

The MIT Press Cambridge, Massachusetts London, England

© 2004 Massachusetts Institute of Technology

All rights reserved. No part of this book may be reproduced in any form by any electronic or mechanical means (including photocopying, recording, or information storage and retrieval) without permission in writing from the publisher.

This book was set in Times Roman by ICC and was printed and bound in the United States of America.

Library of Congress Cataloging-in-Publication Data

Rosser, John Barkley Comparative economics in a transforming world economy / J. Barkley Rosser, Jr.,

Marina V. Rosser—2nd ed. p. cm.

Includes bibliographical references and index. ISBN 0-262-18234-3 ISBN 0-262-68153-6 (International Student Edition) 1. Comparative economics. 2. International economic relations. I. Rosser, Marina V.

(Marina Vcherashnaya) II. Title.

HB90.R67 2004 337—dc22

2003059363

Contents

Preface vii

I OVERVIEW OF COMPARATIVE ECONOMICS 1

1 How Do We Compare Economies? 3

2 The Theory and Practice of Market Capitalism 23

3 The Theory and History of Marxism and Socialism 53

4 Islamic Economics and the Economics of Other Religions 85

II VARIETIES OF ADVANCED MARKET CAPITALISM 113

5 The United States of America: The Market Capitalist Leader 115

6 Japan: A Planned Market Economy with Traditional Elements 145

7 Whither Indicative Planning? The Case of France 179

8 Sweden: Crisis and Reform of the Social Market Welfare State 203

9 The Unification of Germany and the Unification of Europe 231

III VARIANTS OF TRANSITION AMONG FORMER SOCIALIST ECONOMIES 262

10 The Former Soviet Union: The Myth and Reality of the Command Economy and Russia’s Economic Transition 265

11 Alternative Paths of Transition in the Former Soviet Union 301

12 Poland: The Peril and Promise of Shock Therapy 337

13 Hungary: Gradualism and the First Successful Completed Transition? 363

14 Worker-Managed Market Socialism: The Collapse of Yugoslavia and the Success of Slovenia 389

15 China’s Socialist Market Economy: The Sleeping Giant Wakes 417

IV ALTERNATIVE PATHS AMONG DEVELOPING ECONOMIES 450

16 India: The Elephant Walks 453

17 Iran: The Struggle for a New Traditional Islamic Economy 487

vi Contents

18 Revolution and Reform in the Mexican Economy 515

19 North and South Korea: The Lingering Shadow of the Cold War 543

20 Evolving Trends of the Transforming World Economy 575

Glossary 589

Index 617

Preface

Although it has been eight years since our first edition appeared, the analysis presented in the preface to that edition remains largely valid. Indeed, we venture to say that we were foresighted in our first edition, with the changes that we made to the standard approach then in place among comparative economics texts to have proven to be more relevant today than they were when we introduced them. We argued that not only was the world economy being transformed, but that comparative economics as a discipline was being transformed as well. We feel that we were on the front wave of that transformation and called its direction reasonably well.

When we wrote the first edition, the traditional approach of comparative economics had focused on comparing market capitalism and command socialism. The breakup of the Soviet bloc after 1989, culminating in the breakup of the Soviet Union itself in 1991, the paradigmatic example of command socialism, and the subsequent move away from this sys- tem by most of the nations in this group, underlay the transformation of comparative eco- nomics as an intellectual discipline. Although some have argued that these events meant that the field itself should simply be absorbed into other fields, perhaps economic development as argued by Russian Premier Yegor Gaidar in 1992 (see the opening quotation to our final chapter), we did not and do not agree. In order to understand the difficult and complicated transitions that the former socialist economies have undergone, it is necessary to understand where they came from, partly because many of them retain crucial elements of their former systems. Also, several of these economies have made relatively few changes from the old system and are still largely command socialist economies. Thus we continue to discuss the ideas behind the command socialist system as well as its history in this edition, thereby pre- serving fundamental elements of the traditional approach to comparative economics.

The major innovation of our first edition was the concept of the new traditional econ- omy, an idea that appeared in print for the first time in that book. We argued that the end of the Cold War meant that the competition between market capitalism and command social- ism would be replaced by the emergence of new forms that would serve as alternatives to the apparently victorious market capitalism. The new traditional economy is a form that reflects an effort to embed a modern economic system into a traditional socio-cultural system, usually one tied to a major world religion.

The leading example in our first edition was Islam, with a chapter in the book devoted to the case of Iran. The importance of Islamic fundamentalism in the world has increased enor- mously since 1996, especially since the attacks in New York and Washington by al Qaeda on September 11, 2001. The aftermath of these events saw an emerging de facto alliance between the former global rivals, the United States and Russia, apparently forming a com- mon front against radical Islamic movements, with even China joining in to a certain degree, despite differences over the war in Iraq. We would argue now that as the process of transi- tion gradually winds down in the various former socialist economies, the significance of the new traditional economy will only increase in importance as the main alternative to the

dominant market capitalist form. Thus we see the emergence of neo-Confucian elements in the Chinese economy, as well as the familistic groupism of the non-socialist Japanese economy, which can be viewed as a traditional remnant in an advanced economy.

Related to the emphasis on the new traditional economy was the argument advanced in two different chapters that the former Central Asian republics of the Soviet Union would emerge as a central locus of the global competition between different economic systems, including the Islamic economic system. The events surrounding the war in Afghanistan and the entry of American armed forces into this region have shown that we were on the right track with this prediction.

Another innovation of our first edition was to introduce an extended section on North Korea, with a fully developed comparison between North and South Korea, a comparison that we are unaware of in any other text. Although this was arguably a reiteration of the capitalism versus socialism perspective of the older comparative economics, it has proven prescient in that the world has come to be seriously concerned with the nature and devel- opments of the mysterious North Korean regime, the last and purest example of a com- mand socialist economy in the world, and the evolving nature of its relationship and possible eventual reunification with South Korea. That a unified and nuclear-armed Korea could be a formidable economic and political power in the world is increasingly clear.

Finally, although several other comparative economics texts continue to have chapters discussing the old worker-managed market socialist system of the former Yugoslavia, ours was the only one to discuss the relative success of the former Yugoslav republic of Slovenia, which has continued to maintain certain elements of its former economic system. We have expanded our discussion of the Slovenian case in chapter 14 in this edition, noting espe- cially how Slovenia has gone against much of the advice given to it by international advi- sory bodies. That it is unarguably the most successful of all the transition economies suggests that it should be more closely studied than it has been.

The most important changes to the book as compared to the first edition are that one chapter has been eliminated while two new ones have been added. The one eliminated was that on the old traditional economy, which dealt substantially with economic anthropology. Certain elements of it have been preserved in chapter 4 on the new traditional economy. The two new chapters, 5 and 16, are on the economic systems of the United States and of India, respectively.

The first of these chapters was added at the suggestion of various reviewers and our pub- lisher. Although there was some limited discussion of the U.S. economy in the second chapter on market capitalism in the first edition, it seemed desirable to provide a more ex- tended presentation in this edition. This is not only because of the clearly more dominant position that the American economy and its system have in the world today, but also because it was the origin of several crucial institutional forms of the market capitalist sys- tem, such as the modern limited liability corporation and the system of interchangeable

viii Preface

Preface ix

parts that energized the rise of the industrial economy. The emergence and problems of the information-based new economy in the United States also have implications for the entire world.

India is important both because of its sheer size and recently accelerated growth, but also as another example of where the question of the new traditional economy is very important, with India now being ruled by a Hindu nationalist political party. At the same time, India retains important elements both of indicatively planned socialism and market capitalism, making it arguably the most complexly mixed economy in the world. It also remains the world’s largest repository of the old traditional economy in its still poverty-stricken rural areas where the Hindu caste system remains in place. The Indian case allows for a broader discussion of the problems of persistent poverty and the increasing global divide between rich and poor as well.

In response to a request, we provide a few more remarks about ourselves than we did in the first edition. Both of us have taught courses in comparative economics or economies in transition at various times. J. Barkley Rosser, Jr. received his education at the University of Wisconsin–Madison where he first encountered the questions involved in this book as an undergraduate in the course on capitalism and socialism taught by the late Jack Barbash, for which he served as a grader later. This course was originated by Barbash’s predecessor, Selig Perlman, who was a close associate of Wisconsin’s influential institutionalist econo- mist, John R. Commons. Although Barkley often takes a mathematical approach to study- ing questions of complex evolutionary economic dynamics, this book reflects, at least in part, influences from this other side of the Wisconsin tradition of economics. He also spent 1981 working in Saudi Arabia, an experience that led him to think about the questions re- lated to Islamic economics that now underpin our new traditional economy approach.

Marina V. Rosser was born in Moscow, Russia, then a part of the Soviet Union, and was educated at Moscow State University in the 1970s. She worked during the early 1980s at the Institute for World Economy and International Relations, at the time a senior advisory think tank for the top decision-making bodies of the former USSR. She was involved both in studying the relations between the Soviet economy and the rest of the world, including the United States and China, and also in working on the long-range planning process of the Soviet Union. She also personally experienced the political repressiveness of that regime before it began its long reform process. After moving to the United States in 1987 she be- came involved in advising on transition policy through the U.S. Agency for International Development and remains in contact with numerous persons in high decisionmaking and academic positions in Russia and other transition countries. This background and knowl- edge provides both the depth as well as the touch of personal experience to the chapters on transition in the former Soviet Union and in its former satellites in Central and Eastern Europe, as well as in our coverage of the Chinese economy, which she studied while in Moscow.

As we did in the first edition’s preface, we confess to having our biases and predilections, which inevitably appear in various places in the book. Nevertheless, we have continued to present as many sides and perspectives and positions as is reasonably possible regarding controversial matters and subjects, and we have continued to report relevant facts and data, even when they do not coincide with our various views and prejudices. We would like to think that it is a mark of our fair-mindedness that some critics have complained that we are “obviously hard-core Marxist propagandists” while others have complained that we are “obviously flacks for hard-edged, Austrian style, pro-laissez faire libertarianism.” In any case, we hope that readers will come away wary of any too vigorously advocated general- izations, and will understand that we live in an exceedingly complicated and constantly changing world.

We both remain grateful to the late Lynn Turgeon, who was responsible for introducing us in the Orwellian year of 1984 and who was also an independent source of ideas for us regarding many of the issues discussed in this book.

Among the numerous individuals thanked in the preface to our first edition, many have continued to advise and help us. We would like to especially thank again Ehsan Ahmed, Ralph Andreano, Bruce Brunton, David Colander, William Duddleston, Éva Ehrlich, Loretta Grunewald, Roger Guesnerie, Robert Horn, Robert McIntyre, Paul Phillips, Frederic Pryor, Dorothy Rosenberg, James Stodder, and Wei-Bin Zhang.

We also wish to recognize and thank others who have helped us either with advice or materials for this edition. Besides a group of anonymous reviewers, these include Peter Boettke, Loren Brandt, Daniel Cohen, Mark Foley, Robert Frykenberg, James Galbraith, Hermann Haken, Donald Hester, Richard Holt, Michel Juillard, Roger Koppl, János Kornai, Honggang Li, Julio Lopez, Akio Matsumoto, Claude Ménard, Branko Milanovic, Maria Minitti, Joaquin Oliveira, Elliott Parker, Matti Pohjola, Clifford Poirier, Victor Polterovich, William Pyle, Ajit Sinha, Bernard Vallageas, Clas Wihlborg, and the staff of the Korea Economic Institute. We also would like to thank the numerous adopters of our first edition who have encouraged us to produce this second edition, and hope that they are pleased with the result.

We would like to thank Deborah Dove for technical assistance. Finally, we would like to thank the people at MIT Press for their advice, encouragement,

and faith in this effort, including especially our senior editor, Elizabeth Murry, her assistant, Jane MacDonald, and her predecessor, Terry Vaughn, as well as the various people involved in production and marketing, especially Nancy Lombardi.

We again dedicate this edition of this book, as we did its first edition, to our mothers, Annetta Hamilton Rosser and Nata Borisovna Vcherashnaya, without whose love and care we would not be here to write it.

x Preface

Part I of this book contains four chapters that present the theoretical and conceptual frame- work used in the remaining parts, which consist mostly of sets of country case studies grouped into broad categories.

Chapter 1 presents definitions and basic examples of the categories used in this book: tradition, market, and command for allocative mechanisms and capitalism and socialism for ownership systems. Broad trends in the world economy and in these systems are laid out. In addition, a comparison of many basic economic characteristics for 26 countries is presented.

Chapter 2 lays out the theory of market capitalism, the world’s increasingly dominant system. It discusses the efficiency advantages of market capitalism as well as how these may not be achieved in a purely laissez-faire setting. The kinds of government interventions that might ameliorate these problems are presented.

Chapter 3 examines the theory and history of socialism in its various forms, of which command socialism has been the most important. However, command socialism has now largely disappeared, and the future importance of socialism is likely to come from other forms. The chapter concludes with an overview of the problems of transition from social- ism.

Chapter 4 considers the new traditional economy, a system that seeks to combine a tra- ditional approach, usually based on a traditional religion, with modern technology. The Islamic economy is the most developed example of this emerging form and is discussed in detail, but it also plays a role in the neo-Confucian societies of East Asia.

A central issue running through all these systems is the role of government in the eco- nomy. How much should it be involved and in what ways? Certainly in the contrast between market capitalism and command socialism in their pure forms, this issue is very clear. But an examination of the variations within each of those forms reveals that the vary- ing role of government plays a critical role. Although it is less obvious, government also plays a role in the traditional economies, especially the new traditional economies. The Islamic economic system becomes established only if a government passes laws mandat- ing it, despite the spread of privately owned Islamic economic institutions such as banks in predominantly non-Islamic economies.

I OVERVIEW OF COMPARATIVE ECONOMICS

1How Do We Compare Economies? As mankind approaches the end of the millennium, the twin crises of authoritarianism and socialist central planning have left only one competitor standing in the ring as an ideology of potentially uni- versal validity: liberal democracy, the doctrine of individual freedom and popular sovereignty. . . . In its economic manifestation, liberalism is the recognition of the right of free economic activity and economic exchange based on private property and markets. —Francis Fukuyama, The End of History and the Last Man, 1992

INTRODUCTION

We have witnessed a profound transformation of the world political and economic order since 1989, the ultimate outcome of which is difficult to foresee. The former Soviet Union (FSU)1 broke up, its empire of satellite states dissolved, and most of the former constituent parts are trying to fulfill Fukyama’s prophecy quoted above. In his view, the end of the Cold War means the convergence of the entire world on the American model of political econ- omy and the end of any significant competition between alternative forms of political or economic systems.

Has this prophecy come true? We think not. Certainly during the second half of the 1990s, the economic boom in the United States pushed it forward as a role model that many coun- tries sought and still seek to emulate. But with the outbreak of financial crises in many parts of the globe and the bursting of the American stock market bubble in March 2000, its eco- nomic problems such as continuing poverty and inequality loom large.

Furthermore, it is now clear that the problems in the FSU are deeply rooted, with the transitions in various former Soviet republics stalled. Other market capitalist economies, such as the world’s second largest, Japan, have deep problems of their own, with Japan’s having stagnated since 1990.

Furthermore, the collapse of Soviet Communism coincided with a surge of missionary activity in the formerly Soviet Central Asian republics by advocates of fundamentalist Islam. They present their view not just as a change in personal moral codes, but as a total system of economic and political organization of society, a possible “third way” between capitalism and socialism. Throughout the Islamic world, fundamentalist groups either have taken control of governments or are the leading opposition to existing governments. The terrorist attacks on New York City and Washington, D.C., on September 11, 2001, and

1. Prior to 1917 the Russian Empire included many nationalities ruled by the tsar. With the Bolshevik Revolution, several nationalities gained independence, some permanently, like the Finns and the Poles, and some only briefly, like the Ukrainians. Then there was Soviet Russia. In 1922 it became the Union of Soviet Socialist Republics (USSR) or the Soviet Union, which ceased to exist at the end of 1991. Now there is a loose confederation of 12 of the former 15 republics of the USSR called the Commonwealth of Independent States (CIS). When referring in the present to all of the 15 republics as a group, we shall use the term former Soviet Union (FSU).

4 Overview of Comparative Economics

the subsequent war in Afghanistan made the entire world aware of the seriousness of this global movement. Even after the replacement of the Taliban regime by the U.S.-backed one led by Hamid Karzai, Islamic rules remain largely in place, with women wearing traditional clothing even in Kabul, the capital city.

In other nations, movements based upon fundamentalist versions of local religions have emerged and become prominent. In East Asia, many see the cultural heritage of Confucianism creating a special economic environment. In India, a Hindu fundamentalist regime confronts Muslim Pakistan in a deep conflict. This appeal to economic systems based on traditional religions is the new traditional economy, and it presents a serious alternative on the world stage. Global economic difficulties have been further exacerbated by a series of financial crises that have spread havoc and produced sharp recessions throughout much of the world, including many East Asian nations in 1997, Russia in 1998, and the collapse of Argentina in 2001. These crises have aggravated the deeper systemic crises that many of these economies are experiencing.

In The End of History and the Last Man, Fukuyama recognizes that the rise of Islamic fundamentalism constitutes a potential exception to his thesis, but responds that it will be limited to the zone of existing Islamic predominance, thus ruling it out as a “potentially universal ideology.” But the spread of Islam in Europe and other places raises doubts about this claim. However, the emergence of similar movements within other religions raises the possibility that the new traditional economy concept could be universal even while differing in significant details across religions. Cold War has given way to Holy War.

Even if Fukuyama is right that the socialist alternative will completely die out and that religious fundamentalism will be limited in its appeal, economic tensions between the United States, Japan, and Western Europe have focused attention on deep structural differ- ences between these and other market capitalist economies. There are many varieties of market capitalism, and as various economic problems continue to plague the world econ- omy, the significance of these differences increases and the global search for efficient and humane economic systems accelerates. Many countries sought to emulate some aspects of the Japanese economic system, but now Japan is in deep stagnation. Western Europe and Japan resist the homogenizing influence of the United States and the pressure to imitate its system, with its comparatively greater economic inequality and insecurity. These divergent economic tendencies have been exacerbated by political tensions that have arisen between the United States and many of these nations since 2001.

Indeed, the socialist alternative continues both as an existing system and as a possibility in some form still unseen. Classical socialism in its purest form persists in relatively obscure countries such as North Korea and Cuba. But despite the general dismantling of central planning bureaucracies, legalization of market activities, and privatization drives, portions of the FSU remain effectively socialist in the sense of widespread state ownership of the

How Do We Compare Economies? 5

2. See Martin Weitzman, The Share Economy (Cambridge, Mass.: Harvard University Press, 1984).

means of production. In China, the most populous nation on earth, a grand drama is unfold- ing as the system remains officially socialist while engaging in piecemeal marketization and the spread of capitalism.

Furthermore, even though Yugoslavia has collapsed both as a nation and as an economic system in a horribly tragic way, the idea of workers’ management that its economy imper- fectly represented persists and may have a new lease on life in the form of workers’ owner- ship. This takes a variety of forms, from the profit-sharing share economy,2 to classic cooperatives, to employee stock ownership plans (ESOPs), all of which exist in the United States and other market capitalist economies and are popular in the privatization efforts of many Eastern European countries.

This systemic turmoil coincides with the intense conflict between the “urge to merge,” by which we mean the push for integration of the world economy and its subparts in trade and policy, and the “drive to divide,” the push for independence and isolation by increas- ingly small entities. Also continuing are the deep problems of the less developed countries, many of the poorest of which are in outright economic decline as they search for appropri- ate systems in this changing environment. These difficulties are further exacerbated by a global stagnation of economic growth that aggravates the systemic crises many economies are experiencing.

Thus, the study of comparative economics has never been more important. The subject itself is undergoing transformation, just as its objects of study undergo transformation. Achieving a deep understanding of this transformation of economic systems depends on understanding the cultural and social contexts within which these historical processes evolve.

CRITERIA FOR CLASSIFYING ECONOMIES

How Do We Classify Economies?

In thinking about the nature of economic systems with the intention to compare them, we need to think fundamentally about what we mean by an economy. An economy is made up of a group of people who are located within a political entity that has particular geo- graphical characteristics and who are producing and consuming goods and services. Most important for our perspective, an economy functions according to certain rules, customs, and laws that underpin the institutional framework within which the people operate. It is these institutional frameworks and their basic rules, customs, and laws that we are most interested in comparing across different economies.

6 Overview of Comparative Economics

3. An alternative approach is that of Egon Neuberger, “Comparing Economic Systems,” in Morris Bornstein, ed., Comparative Economic Systems: Models and Cases, 7th ed. (Burr Ridge, Ill.: Irwin, 1994), pp. 20–42. He posits four criteria for classifying systems: their decision-making structure, their information structure, their motiva- tion structure, and their coordination system. These can be seen to relate to the categories we use to some extent, with the decision-making structure tied to the political system, the information structure tied to planning or nonplanning, the motivation structure tied to incentives, and the coordination structure tied to the allocation mechanisms—that is, the contrast of tradition, market, and command—although we see the allocation mechanism as being tied to decision making as well, making it a very central concept.