Car Rentals and Cuban Houses

Have you ever washed a rented car? Former Treasury Secretary Lawrence Summers tells us that, “In the history of the world,” no one has.

For rental cars and Cuban houses, lack of ownership is the common denominator. When Fidel Castro took control of Cuba, he declared that everyone would get a home but no one could buy or sell one. As a result, described by NPR, everywhere, walls are patched with scrap metal, grillwork is rusty, and facades are crumbling.

Now, with Raul Castro, Fidel’s brother, announcing that Cuban citizens could sell their homes, renovation, painting, maintenance and for sale signs are popping up everywhere.

The power of the market system?

Here is an NPR report on Cuban small business start-ups.

The Economic Lesson

Cuba imports 80% of its food supply while the price of nickel, its main export, and tourism, its main “import,” have both declined. Raul Castro said, “We have to erase forever the notion that Cuba is the only nation in the world where it is not necessary to work,” The Economist suggests he might be leading his nation toward a Chinese type of mixed economy.

A mixed economy combines government intervention with a market system. You might want to look at the Index of Economic Freedom to see the extent to which 179 economies are mixed.

An Economic Question: Moving from a command economy to the market, how might incentives change?