Transcript Economic Systems and Theorists

Agenda
• Bellringer
• Review Questions
• Notes: Economic systems with Index Cards
• Exit Ticket
• Mod 3: Thematic Essay due Friday
Review Questions
• Name one negative effect on people caused by urbanization
• Tenements, disease, crime, poor urban planning
• Name one negative working condition people endured in
factories
• No min wage, no safety protocols, child labor, no education
• Name the five factors of production
• Land, labor, physical capital, financial capital, human capital
• What is mercantilism?
• Favorable balance of trade for mother countries, exploiting the colonies
• What was the cottage system?
• Traditional style economy, self sufficient, take care of yourself
Review
Agrarian
Revolution and
FOP in GB
Industrialization
globalized. Seeking
of new raw
materials
Factory system
and urbanization
Unhealthy
working and
living conditions
Government
reforms and
interventions
take place
Economic
theorists look to
solve problems
resulting from
market economy
Objective
• Students will identify how Karl Marx and Adam Smith
believed the problems of capitalism caused by the
industrial revolution would be resolved
Economic Systems and
Theorists
Remember?
• The industrial revolution brought with it many problems in three areas:
• Factory system: labor issues and safety issues
• Urbanization: living standards, social classes
• Pollution: rivers, chemicals, air
Economic Theorists
• Economic theorists around the world began theorizing how to solve these
problems
• Economy is the allocation of resources. An economist studies how to do
that. We must allocate resources because of the issue of scarcity.
• Scarcity: unlimited wants yet limited resources
• Allocate: To distribute
Economic Systems
• The economic theorists considered each of the following economic systems
and identified what they thought was best and why
• They also offered their ideas for improvements
• The Industrial revolution was an example of a massive shift from a
traditional economy to a market economy
Economic Systems
Traditional
Market
Barter
Currency
Self Sufficient
Products made
based on
consumer wants
and needs
Products made
based on history,
customs, tradition
Ex: manorialism in
Europe, Pygmies
in Africa, Inuits in
Alaska
Private property,
choice,
competition, no
govt regs
Ex: GB after IR
Command
Mixed
Everyone
contributes what
they can and
receives what they
need
Consumers choose
what they want
and need
Government has
some regulatory
power
Products made
based on what the
government
Tradition dictates
deems is necessary some production
Ex: Soviet Union,
Cuba
Ex: United States
Traditional
Advantages
No unemployment
No recession/depression
Disadvantages
No new ideas
Creativity discouraged
Lower standard of living
Market
Advantages
Total consumer freedom
Incredible variety
Lots of new ideas/creativity
Disadvantages
Only productive people rewarded
Unemployment
Competition
Depression/recessions
Public needs sacrificed
Command
Advantages
Public needs met
No unemployment
Everyone equal
Disadvantages
Wants not considered
No incentives
New ideas discouraged
Mixed
Advantages
Consumers drive economy
Producers respond
Gov’t intervenes when necessary
Disadvantages
Public needs lacking
unemployment
Depressions/recessions
Karl Marx
Karl Marx and Friedrich Engels
• Karl Marx and Freidrich Engels witnessed the treatment of
workers in factories during the industrial revolution
• They heard the working class people complaining about the
upper class
• They suspected that at some point, the workers will have had
enough and will revolt against their bosses and steal their wealth
to distribute amongst themselves
Karl Marx and Friedrich Engels
• They wrote their ideas down in a pamphlet called “Communist
Manifesto”
• Bourgeoisie: upper and middle class people
• Proletariat: working class and poor people
• The Bourgeoisie controlled the factors of production, while the
proletariat labored in terrible conditions and controlled nothing
Karl Marx and Friedrich Engels
• When the proletariat revolted against the bourgeoisie,
they redistribute wealth amongst themselves
• This would eliminate class struggle – everyone would be
equal
• This new world and government would be called
“dictatorship of proletariat”
Communism
• This control of wealth and factors of production by the
proletariat is what Marx and Engels referred to as
Communism
• Communism: all factors of production will be owned by
the people. No private property.
• In the 1900’s we will see many of these communist
revolutions…
Communism
• Communism = Command economy = Karl Marx
Index Card
• Please create a new index card for Karl Marx and Friedrich Engels
Karl Marx and Friedrich Engels
• “Communism Manifesto”
• Created idea of communism (command economy)
• Proletariat: poor/working class; Bourgeoisie:
upper/middle class
• No private property, no social classes
Adam Smith
“Father of
Economics”
Adam Smith
• Wrote “Wealth of Nations”
• Laissez-Faire: The government should not interfere with
the economy in any way UNLESS the factors of
production are compromised
Adam Smith
• Three principles of free-market economics
1. Law of self-interest: people will work for their own good
2.Law of competition: competition amongst people
makes better products
3. Law of supply and demand: goods will be produced to
meet demand which will equalize prices
Adam Smith
• The principle of supply and demand is also known as the
“invisible hand”
• Invisible hand: consumer demand and producer response
will self-regulate the economy
• This is called capitalism
Adam Smith
• Capitalism = Market economy = Adam Smith
Index Card
• Create an index card for Adam Smith
Adam Smith
• Market Economy
• Laissez faire: NO government involvement in economy
• Free market principles: Law of competition, self-interest,
and supply and demand
• Invisible hand: the market will self regulate because of
supply and demand
Exit Ticket
• What type of economy did Karl Marx advocate?
•
Command
• What type of economy did Adam Smith advocate?
•
Market
• What are the five factors of production?
•
Land, labor, physical capital, human capital, financial capital
• What does scarcity mean?
•
Unlimited wants and limited resources
• What does laissez-faire mean?
•
No government involvement
Who said it?
• On your white boards, tell me who said each of the
following ideas: Marx or Smith?
Marx or Smith?
• The proletariat will revolt against the bourgeoisie
Marx or Smith
• The economy will self regulate based on supply and
demand. This is called the invisible hand
Marx or Smith
• There should be no government involvement in the
economy unless the FOP are compromised (Laissez
Faire)
Marx or Smith
• Dictatorship of the Proletariat
Marx or Smith
• Market economy
Marx or Smith
• Command economy
Marx or Smith
• No private property. All FOP owned by the people
equally
Marx or Smith
• No private property. All FOP owned by the people
equally