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Plan and market(s): a theoretical model of the Chinese grain economy

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  • Chen, Dabai

Abstract

A transition from the traditional planned economy to a mixed economy has taken place in socialist countries during the last 25 years. However, the changes in the operational mechanism of the economy, especially changes in the behavior of the government, households, and firms and changes in the relationship between plan and market(s) within the economy, have not been fully studied and recognized. The primary purpose of this study is to try to keep pace with these changes by using economic principles;This study focuses on the Chinese grain economy, which well represents the changing features of the socialist economy. The theoretical frameworks for both the planned grain economy and the mixed grain economy are developed separately. For each segment of the grain economy, the nature of the whole is determined by analyzing the separate parts. To begin with, each grain economy is naturally divided into the domestic economy and international trade. The domestic economy is separated into urban and rural parts according to the practical situation. Further, the rural economy is broken into two subparts, state farms (state farm households) and agricultural production teams (agricultural households) due to the difference in ownerships. For each basic unit within the economy, its behavior in the markets is illustrated and classified by mathematical and graphical analyses. The total grain demand and supply functions are derived by a unique method of two-stage aggregation. For the international trade, the behavior of the government is classified and the aggregate import grain demand/export grain supply functions are derived;To complete this study, a grain model for China is formulated by combining previous results. The model covers both periods of the planned economy and the mixed economy, contains both domestic and international markets with different characteristics, and provides a tool to assess the impacts of government policy instruments and the interactions of plan and markets;The basic conclusion is that the Chinese mixed economy, as a transition between the planned economy and the market economy, still belongs to the socialist category at present. Several new theoretical findings are obtained, and some conjectures by previous authors are more rigorously supported.

Suggested Citation

  • Chen, Dabai, 1990. "Plan and market(s): a theoretical model of the Chinese grain economy," ISU General Staff Papers 1990010108000010424, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genstf:1990010108000010424
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