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| the process by which the economic and social systems of nations are connected together so that goods services capital and knowledge move freely between nations |
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| the system society uses to provide the goods and services it needs to survive and flourish |
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| traditions based societies |
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| societies that rely on traditional role and customs to carry oiut basic economic tasks |
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| an economic system based primarily on a government authority (a person or a group) making the economic decisions about what is to be produced who will produce it and who will get it |
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| an economic system based primarily on private individuals making the main decisions about what they will produce and who will get it |
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| markets in which individual is able to voluntarily exchange goods with others and to decide what will be done with what he or she owns without interference from the government |
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| according to adam smith the market competition that drives self interested individuals to act in ways that serve society |
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| according to john maynard keynes the sum of the demand of three sectors of the economy:households businesses and government |
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| belief that economic competition produces human progress -survival of the fittest |
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| in Marx's view the condition of being separated or estranged from one's true nature or true human self |
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| the combined effects of increased concentration, cyclic crises, rising unemployment and declinging relative compensation |
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| an economy that retains a market and private property system but relies heavily on government policies to remedy their defidiencies |
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| nonphysical property that consits of knowledge or information such as formulas, plans, music, stories, texts, software etc |
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John Lockes
3 self evident rights
critisicms |
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the right to life leberty and property.
-all persons are free and equal
-each person owns his body and labor
-peoples enjoyment of life liberty and property are insecure
-ppl agree to form a gov to protect and preserve their right to life libertyt and property
*does not demonstrate "natural rights", his negative rights overide conflicting positive rights |
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Adam Smith
Why does government interference hurt public welfare (see box on p. 165)?
What do Hayek and von Mises say in support of Adam Smith? |
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Utilitarian - net benefits of free market system outweigh benefits of government/community interference
Market competition drives self-interested individuals to act in ways that serve society
“invisible hand”
Hayek and von Mises
Governments should not interfere in markets because they cannot have enough information to allocate resources as efficiently as free markets. |
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• John Maynard Keynes
o Disagrees with Adam Smith and thinks that governments should get involved; but how does he claim that government should get involved?
o Aggregate demand |
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If households forego spending, demand can be less than supply, leading to cutbacks, unemployment, and economic depression.
Government spending can make up for such shortfalls in household spending, so government should intervene in markets. |
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• Herbert Spencer
o Social Darwinist
o Why does he say that government intervention in trade is bad? |
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Definition
Evolution operates in society when economic competition ensures the fittest survive and the unfit do not, which improves the human race.
If government intervenes in the economy to shield people from competition, the unfit survive and the human race declines, so government should not do so.
Assumes those who survive in business are “better” people than those who do not. |
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• David Ricardo
o Nations ought to specialize and trade (supports globalization) based on opportunity costs |
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| -even if one country has an absolute advantage at producing everything, it is still better for it to specialize and trade. Free trade was advocated by ricardo who showed everyone prospers if nations sepcialize in making goods whose opportunity costs to them are lower than the opportunity costs other nations incur to make the same goods. he supports gloablization, as wel as A.Smith |
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• Karl Marx
o Capitalism alienates workers (what does he mean by this?) |
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| in cpaitalism workers become alienated when the lose control of their own life activities *capitalism alienates workers from their own productive work, the products of their work, their relationship with each other and from themselves. *Alination also occurs when the value of everything is seen in terms of its market place. |
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• The difference between absolute and comparative advantage
o HINT: One says cheaper production is always better, the other says that it depends on costs |
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| abosolute- a situation where production costs of making a commodity are lower for one country than for another.* comparitive-a situation where the opp costs of making a commodity are lower for one country than for another |
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Don’t spend much time on:
Criticisms of Adam Smith (pp. 167-169), Criticisms of Ricardo (pp. 175-6), Marx’ “real purpose of government” (pp. 181-2), Criticisms of Marx (184-5) |
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Definition
*Smith wrongly assumes demand is always enough to absorb the supply of goods.
*Keynes’ views were challenged when government spending did not cure high unemployment but created inflation |
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