THREE DECISION-MAKING SYSTEMS

THREE DECISION-MAKING SYSTEMS

Let us return now to the study of decision-making systems that
communities may adopt to organise their economic affairs. There
are three examples.
First, consider the economic activity within a small, student-run
community – such as in a university college or hall of residence. In
this example, we can imagine a fairly active social life exists,
perhaps led and organised by a student committee: putting on
discos, arranging a regular supply of drinks and snacks, maybe on
occasions inviting outside agents and artistes to come and entertain
the residents.
© 2004 Tony Cleaver
Now contrast this with the economic life of a large town or city:
an enormous range of industrial, commercial and personal services
are provided – too many to briefly enumerate.
Third, at the opposite extreme, we can consider the economic
organisation of a small family home where housekeeping, maintenance
and family care takes place.
How is it decided in each of these communities what goods and
services should be provided; how (where, when and by whom) these
commodities should be produced and who should enjoy the benefits
of their consumption? Decisions as to what is produced, and how
and for whom, may be taken in very different ways in these three
examples.
Small college communities where everyone knows one another
can often be run very democratically – people being elected for
office and then asking around what goods should be ordered, what
sorts of things people want to get done, etc. An efficient CENTRAL
PLANNING mechanism may evolve – the community’s wants are
surveyed, passed up to the decision-making committee who then
issue orders to outside suppliers or delegate production to internal
groups (the bar committee, the dance organisers, etc).
In a family home, there is unlikely to be any formal election of
senior officers. Most economic decisions are taken by parents and
family elders and roles within the family evolve slowly according to
TRADITION and the circumstances of individuals.
Most of the economic activity in a large city, however, is determined
not by planning, nor by social custom but by the dictates of a
free MARKET. If there is sufficient demand for a product or service
then, subject to its lawful production, it will be provided.
(Governments can outlaw certain trades such that supplies are
severely cut back – but so long as people are willing to pay high,
BLACK MARKET prices production will take place anyway. The free
market can subvert government.)
These three decision-making systems introduced here can be
found in operation all over the world. Their precise application in
any one theatre of human activity will depend on the institutions
and practices of the country concerned – some industries and some
countries may demonstrate a distinct preference for one system
above the rest; another economic organisation may rely on a combination
of all three. Industry in almost any country will demonstrate
© 2004 Tony Cleaver
some element of all three decision-making systems acting together
but let us look for examples where each regime can be studied more
or less on its own.