IntrotoEconomicSystems

Whatisa“market”?Whatisa“commandeconomy”?Whatisa“freemarketeconomy”?

Whatisa“market”?

•  Amarketisanareawherebuyers&sellerscanexchangeeconomicproducts(“voluntaryexchange”)–  Buyers=Goods–  Sellers=Services

•  AcircularflowmodelisoHenusedtorepresentit

Whatare“economicsystems”?

•  EconomicsystemsarewaysthatsocieIesanswerthose3BIGQUESTIONS– What?–  How?–  ForWhom?

•  GovernmentareoHenentrustedwithdevelopingthesesystems

Whendidthedebateovereconomicsystemsbegin?

•  ThedebatebeganduringtheIndustrialRevoluIon–  Late-1700’s-1800’s

•  QuesIonsoverhowinvolvedagovernmentshouldbeinaneconomy

Whatwerethetwosidesinthisdebate?

•  Laissez–faireCapitalists•  AdamSmith•  DavidRicardo

•  “Laissez-faire”•  “Handsoff”

•  Governmentshouldnotinterferewiththeeconomy•  Lettheeconomyworkthingsoutonitsown

AdamSmith’s“InvisibleHand”

Whatis“freeenterprise”?

•  Freeenterprise(modern-capitalism)iswhereindividualscontroltheresources&decidehowtheyareused–  Businessowners

•  Governmentplaysalimited/norole

“HandsOff”Economics

Pros

ù  Economy moved more freely ù  Best “minds” making the decisions ù  Less chance of a major mistake

Cons

ù  No control…

ù  Not everyone’s needs / “voices” are heard

•  TheSocialistMovement•  CharlesFourier

•  Believedgovernmentshouldcontrolcertainfactorsoftheeconomy•  Factories,mills,railroads,etc.

•  Governmentownershipwouldhelpworkers&eliminategreedybusinessowners

Whatwerethetwosidesinthisdebate?

•  TheMarxistMovement•  KarlMarx•  FrederichEngels

•  MoreradicalformofSocialism–  Believedinawarbetweentheclasses

–  Completegovernmentcontroloftheeconomy

Whatwerethetwosidesinthisdebate?

Marx’sEarlyLife

Marxandhiswife,JennyvonWestphalen

MarxtheFinancialMess…

Duringtheirclosefriendship/partnershipofover30years,EngelsandMarxwrote

severalbooksandover1,500leferstooneanother

Whatisa“commandeconomy”?

•  Acommandeconomy(plannedeconomies)iswherethegovernmentcontrolsallaspectsoftheeconomy–  EconomicPlan=Whatwillbeproduced/Forwhom

•  Individualshavelimited/norole

“HandsOn”Economics

Pros

ù  More control = max. payoff!!!! ù  More fairness for workers / business ù  More ability to tax / enrich the gov.

Cons

ù  Could things get worse?

ù  Could government abuse such power?

WouldMarxfitin?“…whatiscertaintomeisthat[iftheyareMarxists,

then]Iamnot[a]Marxist…"