Adam Smith and Karl MarxEconomic Visionaries

Adam Smith (1723-1790)

• Father of Capitalism• 1776 wrote “The Wealth of Nations”• Division of labor creates greater

productivity and wealth• Competition keeps prices down and

quality up

Adam Smith (1723-1790)

• Households and firms interacting in markets act as if they are guided by an “invisible hand”•Naturally leads to desirable market outcomes

• Self-interest causes people to work hard and take risks, which benefits society

Wheaton Glass Factory

Ordinary working people found increased opportunities for employment in the new mills and factories, but these were often under strict working conditions with long hours of labor dominated by a pace set by machines. As late as the year 1900, most industrial workers in the United States still worked a 10-hour day (12 hours in the steel industry), yet earned from 20 to 40 percent less than the minimum deemed necessary for a decent life

Karl Marx (1818-1883)

• Father of Socialism• He wrote “The Communist Manifesto” in 1848• Needs of group over individual• Capitalists exploit laborers

Karl Marx (1818-1883)

• Called for the elimination of private property• Believed workers will rebel against the elite and

demand a classless society• Capitalism eventually leads to communism

Adam Smith and Karl Marx:Shout Out!Label That Belief

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Socialism• Command

Economy

He has a beard.

That beard tho.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Factors of production should be owned by private individuals.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

In order to make sure each person has what he needs,

income should be taken from the high-income earners and

redistributed among low-income earners.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Government sets wages and the prices of goods.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command Economy

Wealth distribution will be taken care of by the “invisible

hand.”

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

A free market will lead to class struggle, and, eventually, revolt!

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Prices are best determined by supply and demand.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Interaction between businesses and individuals

leads to economic efficiency.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Property is used for the benefit of the people as a whole rather

than individuals.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command

Economy

Factors of production are owned and controlled by the

government.

• Adam Smith• Capitalism• Free Enterprise

• Karl Marx• Communism• Command Economy

Economic planning is essential for an economy to flow smoothly.