Unit 6
Economic Systems
Class preparation
Read Ch. 6 "Economic Systems"
Lecture outline
This chapter compares & contrasts the basic economic systems we see in the world.
Any discussion of economic systems must include a discussion of Government.
"Capitalism" arose from the writings of Adam Smith's "Wealth of Nations".
The idea of Capitalism is that in order for citizens to enjoy economic and political liberty, they must strictly limit their government to three major duties.
Read Ch. 6 "Economic Systems"
Lecture outline
This chapter compares & contrasts the basic economic systems we see in the world.
Any discussion of economic systems must include a discussion of Government.
- Many government systems have been devised; but at the end of the day, history is the story of man attempting to rule over his fellow man. Therefore, if you consider what type of government a country has, it will be easier to understand its economic framework.
- Government, in the purely 'Political Science' sense, is force. If you don't pay taxes to Caesar, you'll be jailed. If you oppose the King, you may lose your life. If you operate a monopoly, it can be broken up.
- Therefore, the economic system of a country reflects the type of government it has - because the "economy" is really just how people and firms are planning and interacting on a day-to-day basis
"Capitalism" arose from the writings of Adam Smith's "Wealth of Nations".
The idea of Capitalism is that in order for citizens to enjoy economic and political liberty, they must strictly limit their government to three major duties.
- The government is to protect its citizens from violence and invasion
- The government is to protect the rights of its citizens from infringement by others
- The government is to provide public goods. This would include highways, large civil works, a system of courts, public schools, a military, a monetary system, and so forth.
The word "Capitalism" just means you can raise your own capital from private sources. You don't have to go to the King or Dictator or Government to raise money. You, yourself, can go directly to banks, private individuals, your friends, your parents, the stock market, or "crowd-funding" to finance your enterprise. Those supplying you with capital are then entitled to receive a return on their investment.
With Capitalism, individuals own stock in companies. They actually have real "ownership" in the Factors of Production. Even a poor person can own a small portion of a business enterprise. Almost all large Corporations in America are in effect owned by multitudes of average, ordinary citizens. This is something Marx and Engels did not foresee.
"Laissez Faire" is a famous term used in economics which means "leave us alone". It was the French telling their King, "Stop meddling in the economy, because you're wrecking it".
With Capitalism, individuals own stock in companies. They actually have real "ownership" in the Factors of Production. Even a poor person can own a small portion of a business enterprise. Almost all large Corporations in America are in effect owned by multitudes of average, ordinary citizens. This is something Marx and Engels did not foresee.
"Laissez Faire" is a famous term used in economics which means "leave us alone". It was the French telling their King, "Stop meddling in the economy, because you're wrecking it".
Economic systems broad overview:
- Market economy = Private individuals & firms make their own economic decisions, with an ease that is astonishing. Supply and demand of goods & services is maintained through the disinterested actions of thousand of individuals - without input from bureaucrats. For this to succeed, the government must protect private property and provide a system of courts which uphold private contracts.
- Socialism = The government owns the Factors of Production. The government owns the businesses and farms. Production and pricing decisions are made by politicians.
- Communism (Marxism) = Communism is "Collectivization". There is no private property allowed. If you own property, it is taken away from you at gunpoint. There are no "individuals" as we think of the term. Marxism is not about "individual liberties". It's about State control of everything. A small group at the top make the decisions. There are shortages of everything, and an underground market thrives. Marxism is ruthless, centralized power without regard for economic or civil liberty.
- Monarchy = The King controls everything. You are a "subject". Everything is referred to as, "the King's forest, the King's land, the King's ship". Any sort of private commercial enterprise requires a special charter from the King. The British Crown, for example, very reluctantly allowed private corporations in the 1800's. The Roman Emperors viewed any kind of corporation or private business group as a potential threat to their power. The U.S. rejected the concept of Monarchy in 1776, in favor of government "of, by, and for the people".
- Oligarchy = A group of families run the country. They exercise their control over private commercial enterprise through family connections. A common approach in some countries. Sometimes referred to as a "traditional economy".
- Theocracy = The Mullah's are in charge. Economic freedom is not part of the deal. In Middle Eastern oil-rich countries, the wealth is concentrated at the top.
Classroom experiment
"A common property experiment with a renewable resource"
Learning objectives: property rights, allocation of natural resources, negotiation, cooperation
Discussion: "Tragedy of the Commons"
"A common property experiment with a renewable resource"
Learning objectives: property rights, allocation of natural resources, negotiation, cooperation
Discussion: "Tragedy of the Commons"
| a_common_property_experiment_with_a_renewable_resource1.docx |
Homework (refer to your class emails for due dates)
| buying_a_car assignment.docx |
| 6._national_socialism_research_assignment1.docx |
The questions on the National Socialism assignment have been synched to this version of the documentary, below:
Below: Here's Glenn Beck's introduction to the documentary
| U.S. Gov't Revenues assignment |
| United States Federal State and Local Government Revenue for 2016 |