Download generally present - Foundation for Teaching Economics

Classroom Activity – Lesson 1:
“Defining Terms”
“Capitalism” is identified by its
characteristic institutions
Institutions: the formal and informal “rules of the
game” that shape incentives and outline expected
and acceptable forms of behavior in social
interaction.
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Private Property Rights
Rule of law
Open, competitive markets
Entrepreneurship and innovation
ECONOMIC ANALYSIS
clearly present – the component is present in the economy with few
exceptions
generally present – the component is present in the economy, but with
many or significant exceptions
generally absent – the component is only present in the economy in
some limited forms
clearly absent – the component is almost entirely excluded from the
economy
not enough information
Present ?
markets
private property
rule of law
entrepreneurship
Evidence?
United States
•With a population of 310m, the US has the largest and most
technologically powerful economy in the world, with a GDP of
$14.6t and per capita GDP of $48,500. US business firms enjoy
greater flexibility than their counterparts in Western Europe
and Japan in decisions to expand capital plant, lay off surplus
workers, and develop new products. At the same time, they
face higher barriers to enter their rivals' home markets than
foreign firms face entering US markets. US firms are at or near
the forefront in technological advances, and consistently rank
in the top three countries in the world for patent applications,
along with China and Japan.
•The economic downturn of 2008 has seen economic growth
slow to 2.8% in 2010, un-employment rise to 9% nationally
(103rd in the world), government spending as a percentage of
GDP increase to 42.2% and gross public debt surpass 100% of
GDP.
United States
•The judiciary functions independently and predictably
although serious constitutional questions have arisen
regarding the government mandated health insurance
decision.
•Corruption and cronyism is on the increase and is
undermining the institutional integrity of the rule of law,
resulting in an 86th percentile ranking in control of
corruption and a corruption perception index of 7.1 (out
of 10) by Transparency International and a decrease of
4 points in the heritage Foundation score to 71 from a
previous 75 in 2010.
•Property rights are guaranteed, although affected by
increasing regulations, ranking the US 19th in the world,
with a score of 85 out of 100 by the Heritage Fndn.
Specific Situation: Apple Patent Victory
Aug. 25, 2012
SAN JOSE, Calif.—Nine jurors delivered a sweeping victory to
Apple Inc. in a high-stakes court battle against Samsung
Electronics Co., awarding the Silicon Valley company $1.05
billion in damages and providing ammunition for more legal
attacks on its mobile-device rivals.
Jurors Friday found that Samsung infringed all but one of the
seven patents at issue in the case—a patent covering the
physical design of the iPad. They found all seven of Apple's
patents valid—despite Samsung's attempts to have them
thrown out. They also decided Apple didn't violate any of
the five patents Samsung asserted in the case.
ECONOMIC ANALYSIS
clearly present – the component is present in the economy with few
exceptions
generally present – the component is present in the economy, but with
many or significant exceptions
generally absent – the component is only present in the economy in
some limited forms
clearly absent – the component is almost entirely excluded from the
economy
not enough information
Present ?
markets
private property
rule of law
entrepreneurship
Evidence?
clearly present
Prices and products
determined in markets
clearly present
Patents upheld
clearly present
Courts act and
decisions are enforced
clearly present
Millions of companies
operate in every sector
Capitalism is best thought of not as “a system,” but as a
continuum of institutional combinations . . . .
More
Less
capitalist
capitalist
Some institutional forms confer benefits on the poor
. . . and others do NOT.
Fraser Institute Index of Economic Freedom 2009
2007 data
Note
scale
change
10
9
8
Most Free: Hong Kong 8.9
7
6
Least Free: Zimbabwe 2.9
5
Fraser Institute Index of Economic Freedom 2012
2010 data
Note
scale
change
10
9
8
Most Free: Hong Kong 8.9
7
6
Least Free: Venezuela 4.07
5
2012 Rankings* (Out of 144)
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Hong Kong 1
Singapore 2
NZ 3
Switzerland 4
Australia 5
Canada 6
Bahrain 7
Mauritius 8
Finland 9
Chile 10
United Kingdom 12
Ireland 12
U.S. 18 (down from 3 in 2006)
Japan 20
Poland 48 (88 in 1990)
• Uganda 50 (67 in 2010, 51
in 2001, 113/113 in 1990)
• Jordan 62 (42 in 2010)
• Greece 81
• Mexico 91 (69 in 2010)
• Egypt 99 (from high of 46,
80 in 2010)
• Israel 52 (44 in 2007, 83 in
2011)
• Russia 95
• China 107 (82 in 2010)
• India 111
• Iran 111
• Zimbabwe 142
• Myanmar 143
• Venezuela 144
* 2010 data
Becoming more free: which institutions?
Becoming less free: which institutions?