Capitalist Revolution Flashcards
Ib’n Battuta
A Moroccan traveler and merchant that journeyed 70K miles across the Middle East, Europe, Asia, India, etc. observing the economies, people, and systems around the globe.
Income
- Total Income / Population
- Provides average income for a nation; provides an understanding of an individuals standard of living—what they can buy without borrowing.
Pro: Best way to assess the standard of living
Con: (1) Many earn above and below, (2) Doesn’t indicate the presence of QoL: respect, autonomy, environmental safety, security,
GDP (per capita)
Gross Domestic Product (pc): total market value of the output of a nation/ population
- Measured three ways: output, income, and expenditure.
- Must take into difference across time (constant prices) and btw countries (Purchasing Power Parity).
Pros: best measure available
Cons: (1) doesn’t account for unpaid domestic work, (2) Nothing about the distribution of wealth, (3) includes as a positive sales of products like petrol/oil.
Invisible Hand
The markets can coordinate the self-interested pursuits of people to create socially desired outcomes.
Adam Smith
Creator of modern economics; Wrote (1) an Inquiry into the Nature and Causes of Wealthy Nations and (2) The Theory of Moral Sentiments
- introduced the idea of the invisible hand
- examined how we can coordinate individuals actors in an economic system; believed it could be spontaneous and without institutional guidance.
- Thought failings of the market system include monopoly and tragedy of the commons (unclear property ownership)
- need for public works/goods, police & govt adjudication of justice
real wage (real buying power)
takes into account price/ money over time
Technology
the materials and other inputs necessary to produce an output; capitalism led to significant technological advancement–improving productivity, lowering costs, cutting time, standardization, etc.–and improvements in standard of living
capitalist revolution
scientific advancement and new economic systems together; tech innovations, ways of organizing production, and distribution of benefits
- knowledge spread
- end of colonialism
Population Growth & Capitalism
- Public health policies, improved sewerage, agricultural advancements, clean water, spread of modern medicine–these all led to a reduction in death.
Birth of Cities
-increased labor productivity and agricultural output meant less laborers were needed to farm; people pursued different and new trades.
Capitalism
A economic system that determines the way we organize how we produce and distribute goods and services that make up livelihoods.
- wage labor
- production for profit; risk taken on by capitalist
- Needs effective capitalist economic institutions and government that functions well to support them
Other Economic Systems
- Slavery : production for profit, unpaid, forced labor; meager accommodations & sustenance.
- Feudalism : farmers paid rent to produce food on land; land owners increased wealth
Communism
- central production plan
- goods not for sale–firms need to meet plan requirements
- paid laborers
Industrial Revolution
- New technology and innovation originating in England
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Capitalism’s Carrots & Sticks
Carrots: (1) capitalists: increased wealth, (2) wage laborers: jobs
Sticks: (1) capitalists: loss of capital and bankruptcy, (2) wage laborers: lost job
Capitalism & Technology
Tech advancement & Capitalism go hand and hand; Requires proper management, efficiency, technological advancement, ability to compete to remain a capitalist.
- First time this was the case
- Firms that aren’t productive or competitive shouldn’t be saved.
- is this really still the case?
Capitalism & Order
- Requires order, laws, and judges to ensure wealthy are protected when taking risks and make investments.
- Investors need a legal framework providing protection: contract laws, no theft/stealing, deliverables from suppliers, recognition of ownership, etc.
Gini Coefficient
GC measures how unequally you divide the wealth.
1-G/2: The Fraction for the individual getting smaller piece of the pie; this tells you how much of the pie (wealth) is allocated to the poorest in a country
Disposable Income and Taxes & Transfers
- Many charts didn’t take into account taxes & transfers because they didn’t account for much
- Now use disposable income to assess inequality
- A country can have higher gini coefficient (more unequal), but fair taxation & distribution of transfers (Germany) OR a country can have equitable disposable income (strong schools, wages, etc) and less taxes & transfers
- differences in government and the legal system determines how well capitalism functions
Economics
- How we produce our livelihood
- How we interact with each other to do this. (consumers/ producers, buyers/sellers, savers/buyers, public servants/tax payers.)
- How we interact with nature.
Economic Model
- Households : labor, housework, pollution & waste
- Firms: equipment/machinery, goods & services, pollution & waste
- Biosphere: raw materials, land, energy, water
