Capitalism & Economic Freedom

2.3

Price Stability• Where on the graph was the U.S. economy the best?

INFLATION?

• DEMAND-PULL

• COST-PUSH

• QUANTITY THEORY

GROWTH• The US stock market has always grown over a 10 year

period. However, the type of TOP industries has changed considerably.

• The chart below shows samples of the largest 100 U.S. companies. (Primary v. Secondary v. Tertiary)

Not sure where, but…

HONG KONG Employment

CAPITALISM & FREE ENTERPRISE

–Capitalism: Private citizens control the factors of production

–Free enterprise: Competition w/o interference

ECONOMIC FREEDOM•Main idea—people and businesses can

do what they want (work/shop/sell/etc.) when and where they want

•On a scale of 1-100, how much economic freedom do people actually have?

•Who in society has the MOST freedom? Why?

2008 Index of “Economic Freedom”

http://www.heritage.org/index/countries.cfm

PRIVATE PROPERTY• Examples?• “Private property gives people the incentive to

work, save, and invest.” (p. 48) – True or False?

• The fact that people own goods such as cars, watches, and furniture is not really controversial. However, ownership of LAND can be quite controversial. How?

• Which is better—private or public ownership of land?

• Do people that own land tend to think in the long-term or the short-term?– Mr. Patel– Others

Profit and Profit Motive• Does profit mean

“money earned”?

• Let’s name some effects of profit motive?– On goods and

services– On workers– On the environment– On Standard of living

3 Major Roles in a Capitalist Society

WHAT IS AN ENTREPRENEU

R?

“When an entrepreneur is successful, everybody benefits.” p. 49

–Here’s why!• Entrepreneur gets profits, a growing business, and the

satisfaction of a job well done.

• Workers are rewarded with more and better-paying jobs.

• Consumers are rewarded with new and better products.

• The government is rewarded with a higher level of economic activity and larger tax receipts which can be used to build roads, schools, and libraries for people not even connected with the original entrepreneur.

• Successful entrepreneurs attract other firms to the industry who try to “grab a share” of the profit. To remain competitive, the original entrepreneur may have to improve the quality or cut prices which means that the customer can buy more for less.

Role #2: Consumer–How are dollars/won/etc. seen as

economic “votes?”• Key concept: Consumer sovereignty• Why are consumers considered the most important of the 3

roles in a free market society?• “The customer is always right”

–True or False: Consumers’ wants constantly change.

• Today, more Americans purchase home computers than tvs though computers were barely known just 20 years ago.

• Recent successes: SUVs, home video games, pcs• Recent failures: “New coke,” Celery flavored Jell-O, etc.

Role #3: The Good Ole Ye Ole

Government• Role of the Government

– Protector (against what?)• False/misleading ads, unsafe food/drugs, environmental hazards, unsafe automobiles, discrimination• Drug dilemma/FDA

– http://www.jewishworldreview.com/0605/stossel060805.php3 (defnition: Snake Oil salesman)

– Provider & Consumer (of what?)• Defense services• Education/Public welfare• Parks, libraries, public transportation• Gov’t becomes a large CONSUMER in order to PROVIDE

– Regulator (of what?)• Preserving competition• Directly oversees some industries such as banking & nuclear power• Also regulates communications, insurance rates, building/zoning ordinances• Most controversial of the roles

– Promoter of National Goals • Not really important

WHAT IS THE PROPER ROLE OF GOVERNMENT IN

THE ECONOMY?