Characteristics of Capitalism.

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Chapter 3 Characteristics of Market System Capitalism
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Editors Note: McConnell Microeconomics Review
is one of many source of material included in this chapter.
I. Basic characteristics of capitalism (market economy)
   A. Economic systems determine what to produce, how to produce, and who will receive
         production.
    B. An economic system must also have the ability to adapt to changing economic
         environments. For example, How will America's economic system adapt to changes
         caused by September 11?
    C. Adam Smith described the beginning of capitalism.
      1. His book, The Wealth of Nations, was the first description of capitalism.
         2. Published in 1776, it described capitalism as it was practiced in 18th century England.
         3. For more visit http://www.econlib.org/library/Enc/bios/Smith.html
    D. Basic characteristics described by Adam Smith
      1. Private property-the right to own resources and bequeath property
       2. Freedom of enterprise-own a business
       3. Freedom of economic choice-work/not work, spend/not spend
       4. Role of self-interest
       a. People are by nature economic creatures
         b. Self-interest is a fundamental characteristic of people
       5. Competitive market system
         a. Many buyers and sellers
          b. Market participants, buyers and sellers, have little control over price
          c. Competition performs the organizing and controlling functions for a
                   market economy
       6. Limited government ("Laissez-faire ")
             a. Government should let markets be with a hands-off philosophy)
              b. Acceptable government involvement has become an important political
                  question in the United States during the last few decades.
    E. Modern Capitalism has additional features
         1. Complex Market System Setting Prices
         2. Importance of Capital Goods and Technology
         3. Specialized
             a. Complexity requires company produce limit their product lines
             b. Division of Labor allows specialization by ability ad training.
    F. Creative Destruction described by 20th century sociologist and
        economist Joseph Schumpeter
        was an important addition to the idea of capitalism.
      1. Change involves the creation of improved economic structures based on
            technology and the destruction of inefficient  economic structures.
      2. Capitalism allows this destruction to take place.

Adam Smith from Wiki

wiki on Joseph_Schumpeter

II. The Circular Flow of Money

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III. Economic Systems
      A. Pure capitalism as described by Adam Smith never existed.
      B. Recent economic systems have are Mixed Economies (a mixture of Capitalism
         and Socialism)
          1. Socialism emphasizes collective ownership and management of economic
              resources that are equally distributed.
          2. Democratic Socialism, as practiced in Western Europe, has public ownership
              of key industries such as transportation and communication
              a. The economic systems of Europe began moving away from socialism toward
                  capitalism in the late 1970's
              b. Margaret Thatcher, former prime minister of England, started this trend.
              c. Ronald_Reagan agreed and stressed the market system during his presidency
                 (1981-89).
          3. Communism is the ideal of those practicing a "Marxian system."
              a. Named after 19th century philosopher Karl Marx
              b. The public owns almost all wealth which is centrally managed, i.e.,
                  a planned economy
              c. Harvey - Is Marxism Relevant Today? Video
              d. Presidential Courage explores how Ronald Reagan deplored Communism.
      C. Traditional economy, where customs determines the economy activity, is practiced
           by many developing countries.
IV. Political Systems
      A. Democracy All the People have equal say.
      B. Republic is a country in which some significant portion of the people,
           have supreme control over the government and where offices of state are not
           granted primarily based upon family, military, or business connections.
            1. An Important Distinction: Democracy vs Republic
            2. Republic vs Democracy
     C. Federalism divides powers between member units
          1. Federalism in the United_States
          2. Federalism: National vs. State Government
     D. Political Systems have to do with control.
V. Supplemental reading materials
     A. Crises Capitalism video contains ideas about capitalism resulting from
          the Great Recession of 2008-2009.
     B. Why is Chinese Capitalism Better than American Capitalism? Time, 1/20/11
     C. Alexis_de_Tocqueville wrote about capitalism and democracy in 19th century
         America. See Democracy in America-Vol_1
     D. Democratic Capitalism vs. Capitalistic Democracy
VI. Sundry Information
        A. For a somewhat conservative view of capitalism, visit Capitalism.org.
      B. For a somewhat liberal view of capitalism, visit The Shared Capitalism Institute.
        C. Interesting Links from Reference.com
       1. reference.com on Capitalism
          2. Why Do Intellectuals Oppose Capitalism? by Robert Nozick
       D. Current Events Internet Library has an interesting economics section.
       E. The Book Summaries Internet Library political section reviews Hoodwinked,
            a book by John Perkins who feel international corporations are altering capitalism
            as practiced today.

VII. 5 Key Economic Questions an Economic System Must Answer
        are the topic of chapter 5.

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James Keir Hardie was an
early democratic socialist,
who founded the
Independent Labour Party
in the United Kingdom

Class Discussion Question.
Has President Obama been a Democratic Socialist?
Begin with a nominal definition of Democratic Socialism.

The establishment of universal male suffrage in France in 1848 was an important milestone in the history of democracy.

Alexis de Tocqueville

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Our Free Internet Libraries improve grades and careers.	Our Tutors/Experts Are Available 24/7 Economics Marketing Mathematics Statistics Writing Experts
Chapter 3 Characteristics of Market System Capitalism When printing these 2 pages, try portrait mode at 70% with minimum margins. Please Blog Friends About This Free Library Using Return to Economics Notes Table of Contents
Editors Note: McConnell Microeconomics Review is one of many source of material included in this chapter. I. Basic characteristics of capitalism (market economy) A. Economic systems determine what to produce, how to produce, and who will receive production. B. An economic system must also have the ability to adapt to changing economic environments. For example, How will America's economic system adapt to changes caused by September 11? C. Adam Smith described the beginning of capitalism. 1. His book, The Wealth of Nations, was the first description of capitalism. 2. Published in 1776, it described capitalism as it was practiced in 18th century England. 3. For more visit http://www.econlib.org/library/Enc/bios/Smith.html D. Basic characteristics described by Adam Smith 1. Private property-the right to own resources and bequeath property 2. Freedom of enterprise-own a business 3. Freedom of economic choice-work/not work, spend/not spend 4. Role of self-interest a. People are by nature economic creatures b. Self-interest is a fundamental characteristic of people 5. Competitive market system a. Many buyers and sellers b. Market participants, buyers and sellers, have little control over price c. Competition performs the organizing and controlling functions for a market economy 6. Limited government ("Laissez-faire ") a. Government should let markets be with a hands-off philosophy) b. Acceptable government involvement has become an important political question in the United States during the last few decades. E. Modern Capitalism has additional features 1. Complex Market System Setting Prices 2. Importance of Capital Goods and Technology 3. Specialized a. Complexity requires company produce limit their product lines b. Division of Labor allows specialization by ability ad training. F. Creative Destruction described by 20th century sociologist and economist Joseph Schumpeter was an important addition to the idea of capitalism. 1. Change involves the creation of improved economic structures based on technology and the destruction of inefficient economic structures. 2. Capitalism allows this destruction to take place.		Adam Smith from Wiki
		wiki on Joseph_Schumpeter
II. The Circular Flow of Money Please Blog Friends About This Free Library Using Our Free Internet Libraries improve grades and careers. 3 Free Business Book Summaries has New York Times Bestsellers

Return to Last Chapte	Our Economics Tutors can help Free Trial	Capitalism by Ayn Rand Ben Bernanke's Fed Alexis deTocqueville
Chapter 3 Class Discussion Questions
Chapter 3 Homework Questions

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Economics Internet Library