Capitalist Revolution

Question 1

Ib’n Battuta

Answer 1

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.

Question 2

Income

Answer 2

1. Total Income / Population
2. 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,

Question 3

GDP (per capita)

Answer 3

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.

Question 4

Invisible Hand

Answer 4

The markets can coordinate the self-interested pursuits of people to create socially desired outcomes.

Question 5

Adam Smith

Answer 5

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

Question 6

real wage (real buying power)

Answer 6

takes into account price/ money over time

Question 7

Technology

Answer 7

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

Question 8

capitalist revolution

Answer 8

scientific advancement and new economic systems together; tech innovations, ways of organizing production, and distribution of benefits

• knowledge spread
• end of colonialism

Question 9

Population Growth & Capitalism

Answer 9

• Public health policies, improved sewerage, agricultural advancements, clean water, spread of modern medicine–these all led to a reduction in death.

Question 10

Birth of Cities

Answer 10

-increased labor productivity and agricultural output meant less laborers were needed to farm; people pursued different and new trades.

Question 11

Capitalism

Answer 11

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

Question 12

Other Economic Systems

Answer 12

• Slavery : production for profit, unpaid, forced labor; meager accommodations & sustenance.
• Feudalism : farmers paid rent to produce food on land; land owners increased wealth

Question 13

Communism

Answer 13

• central production plan
• goods not for sale–firms need to meet plan requirements
• paid laborers

Question 14

Industrial Revolution

Answer 14

• New technology and innovation originating in England

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Question 15

Capitalism’s Carrots & Sticks

Answer 15

Carrots: (1) capitalists: increased wealth, (2) wage laborers: jobs
Sticks: (1) capitalists: loss of capital and bankruptcy, (2) wage laborers: lost job

Question 16

Capitalism & Technology

Answer 16

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?

Question 17

Capitalism & Order

Answer 17

• 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.

Question 18

Gini Coefficient

Answer 18

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

Question 19

Disposable Income and Taxes & Transfers

Answer 19

• 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

Question 20

Economics

Answer 20

1. How we produce our livelihood
2. How we interact with each other to do this. (consumers/ producers, buyers/sellers, savers/buyers, public servants/tax payers.)
3. How we interact with nature.

Question 21

Economic Model

Answer 21

1. Households : labor, housework, pollution & waste
2. Firms: equipment/machinery, goods & services, pollution & waste
3. Biosphere: raw materials, land, energy, water