chapter  3
Political Rights and the Role of Government in a Market Economy
Pages 36

From the standpoint of economic phenomena, a society’s political decisions are those that formulate its socioeconomic goals, both directly and indirectly, as well as those that determine the nature of the economic system. All decisions, includ­ ing the making and interpreting of laws that help to shape the distribution of property rights, are political decisions. By contrast, a society’s economic deci­ sions determine specific quantities of inputs and outputs or specific prices within the organizational and goal framework created by its political decisions. For example, decisions by the manager of an enterprise or an industrial ministry that set specific output targets or determine specific production methods are eco­ nomic decisions. However, a law defining a policy on taxes and subsidies is the result of a political decision, as is a law granting monopoly power to firms or labor unions. The same would be true of the five-year plans (whose targets were expressions of intent rather than orders to produce) in Soviet-type economies. When a firm takes advantage of its monopoly position to raise prices and restrict output, it is making an economic decision. Economic and political decisions are interdependent, and the boundary between them is not always precise.