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Comparative Economics by E. Neuberger, J. Montias, A. Ben-Ner

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8. AGGREGATE SYSTEM PERFORMANCE AND COMPARISONS

8.1 The determinants of outcomes

The outcomes of any economy will ultimately be determined by two broad classes of factors that may be subsumed under (1) environment and (2) economic system. Thus:

where ok is a vector of outcomes for economy k, ek is a vector of the states of the environment for that economy, and sk is a vector of system components.

In this formulation the initial preferences of participants are included in ek. To the extent preferences are shaped by the contemporary environment, the economic system, and outcomes of the economy (Felix, 1979), we may also write:

where U

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