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Transcript
Economic Systems and Economic Thinkers Three Key Economic Questions What economic goods will be produced? How will goods be produced? For whom will the economic goods be produced? Each economic system answers these questions in a different way. Traditional economy Skills are passed from parents to children Human and animal labor is used, rather than industrial machine power Traditional production used throughout history and still in many parts of the world today Capitalism 1. 2. 3. 4. Private ownership of most property Market is used to exchange goods Profit is main motive of production Synonymsmarket system or free enterprise Socialism Public ownership of most property 2. Government economic plan used for key decisions 3. Not for profit 4. SynonymsCommand Economy 1. Formula for determining government involvement Share of economy consumed by government = Government consumption/Total Economy E.g Sweden Government consumption=72 b. Total Economy = 259 b. 72/259= 35% government and 65% private (source Heritage Foundation) Adam Smith QuickTime™ and a decompressor are needed to see this picture. Father of Capitalism Wrote Wealth of Nations in 1776 Called for free markets without government interference (laissez faire) “invisible hand” description of market Karl Marx QuickTime™ and a decompressor are needed to see this picture. Father of Communism Wrote The Communist Manifesto Believed that capitalism should be overthrown and replaced by socialism Under socialism means of production controlled by government Communism “from each according to ability, to each according to need.” Thomas Malthus QuickTime™ and a decompressor are needed to see this picture. Viewed economics as the “dismal science” Believed that population would outstrip production Overpopulation would lead to a downward pressure on wages, leading to poverty and starvation John Stuart Mill QuickTime™ and a decompressor are needed to see this picture. Supported free markets Supported some forms of government interventions based on utilitarian principles Proposed a progressive income tax to redistribute wealth and fund government services for the poor John Maynard Keynes QuickTime™ and a decompressor are needed to see this picture. English economist believed government in a capitalist society could stabilize the economy He proposed increasing government spending and cutting taxes during a recession He is a main macro economic theorist Alfred Marshall QuickTime™ and a decompressor are needed to see this picture. Neo-classical economist realized that both supply and demand influence price He developed supply and demand graphs used in microeconomic analysis The Great Debate Do you think that the collapse of the Soviet Union and China’s movement toward markets indicates the triumph of capitalism over socialism/communism? Why or why not?