part 3 compatative economics Flashcards
Traditional economics descriptions
- predominantly agriculture
- developing or 3rd world
- trade and barter oriented
- low gdp & pc (per capita =average income)
Traditional economics
Economic questions answered by custom
Command economy
- economic questions answered by the government
- very little economic choice
- no private ownership
- communism
- old Soviet Union, old communist China, cuba, and North Korea
Karl Marx
- 19th century german economist
- author of “communist manifesto” and “dad kapital”
- government should control economy and distribute good and services to the people
- founder of revolutionary socialism and commits
Communist manifesto
- Karl Marx
- marked reforms in China in the mid 1970’s
- fall of the Berlin Wall in 1989
- collapse of the S.u. 1992
- free market capitalism ( without some mixed economics the only show in town)
Free Market (capitalist) economics
- economic questions answered by producers
- limited government
- private property
- wide variety of choices and products
- us and Japan
Adams Smith
- 18 century Scottish economist
- published the wealth of nations in 1776
- explained the workings of the free market within capitalist economics
- invisible hand of the market
- laissez faire
Laissez-faire
- leave it be
- government stays out of the business practices “hands off” to let the market place determine production, consumption and distribution
- individual freedom and choice are emphasized
Capitalism
More business means lower prices and higher quality products for consumers (us!) to buy
Principles of capitalism
- voluntary exchange
- private property
- consumer sovereignty
- profit motive
Voluntary exchange
Business and consumers must be free to buy or sell what and when they want
Private property
Individuals and businesses must be able to get the benefits of owning their own property. Government doesn’t control it
Consumer sovereignty
Consumers get to make free choices about what to buys and this helps drive production ( demand drives supply)
Profit motive
People want to make Or save money.
Their “self interest” motives capitalism
Principles of capitalism
Social safety net: “mixed economy” idea says the government shouldn’t allow people to suffer in economic crisis ( natural part of capitalism business cycle but provide security instead)
