Question

What two theories in Commanding Heights were pointed out the most?

Answer 1

Commanding heights is a renowned book which was written by Daniel Yergin and Joseph Stanislaw and broadly focuses on how an economy should be governed and the theories of socialism as well as capitalism have been highlighted through the same.

When an economy decided on how it wants to distribute wealth and resources, it usually can choose between these two and a third which is a mix of these two techniques. The same are described in detail as follows: -

1) Socialism: -

Socialism is a technique of managing an economy, in which the government decides what goods and services are to be manufactured, the concept of private property does not exist and all resources are distributed as per the whims of the government.

The core reason why this as a policy has not been implemented and followed in the modern times is that consumers do not gain from this. The market only has those goods and services which are essential in nature and the demand and supply of all other goods remains low. The economy does not progress at its desired rate in such circumstances and fails to create positive environments for overall business and growth.

2) Capitalism: -

On the other hand of the coin exists the theory of capitalism. It focuses around creating highest possible customer satisfaction and the forces of demand and supply determine what goods and services would be available in the economy. Players are free to exit and enter such markets and the government’s role is limited to administration and setting laws.

Such economies have grown over the years, and are also known as market-based economies. They help in achieving growth rates which were unheard off in the past and rapid economic development which further helps people.

Summary: -

The book focuses on the comparison between the two theories and rightly says that socialism is bad for the economy in general. When the government tightens its control over business activities it leads to a situation of dis equilibrium and most resources are never able to be deployed at 100%. A country that focuses on only making essential items available and having high tariffs is never able to survive international markets and exports remain extremely low.

Thus, following a capitalist society brings in higher profits for business as well as helps in growing the economy at a higher rate. It is vital for any developing or developed country to follow this as per the book and in real economics we see practicality of the same as well.

Please feel free to ask your doubts in the comments section.