1. S
American Free
Enterprise System

2. Modern Systems
S All modern systems are “MIXED” or “BLENDED”
S Why?
S Because all “Pure” systems have major flaws that
need adjusting.
S Government must play a role.
S PURE COMMUNISM only exists in isolated
pockets of the world

3. Difference between Mixed
Capitalism and Socialism
Mixed Capitalism:
S Government regulates
and subsidizes
S People own the
industry.
S Taxes = lower %
EXAMPLES:
1. Energy
2. Transportation
Socialism:
S Government ownership
of industry to provides
NEEDS
S Taxes = Higher %
S Allows free market to
exist, BUT the
government uses
taxation to redistribute
wealth and provide more
services (EQUITY)

4. Profit Motive
Keep the MONEY YOU
EARN
$$$$$$$$$$$$$$$$
BENEFITS:
S Efficiency / Innovation /
Creativity / Productivity

5. Competition
OPEN OPPORTUNITY BENEFITS:
S ALLOWS ECONOMIC
MOBILITY

6. Private Enterprise
(ENTREPRENEURSHIP)
LEGAL EQUITY  anyone
can go into business for a
profit
GOV’T does NOT own things
WE DO!!!!
BENEFITS:
S Encourages “productive
potential” to be
reached.

7. Private Property
People own property /
Government MUST
Compensate you if taken
away
What happens when Private
Property is GONE?
Tragedy of the Commons
BENEFITS:
S Provides incentive for
wise use of resources
S Do you want to waste
your natural resources
(land)?

8. Consumer Sovereignty
S Voluntary Exchange:
S Buyers and Sellers
work freely in the
market
S Ultimately the
consumers decide what
is produced.
BENEFITS:
S Encourage competition
and market variety

9. Government’s Role?
S Assure that ALL 5 basic Principles (Pillars) remain in tact.
S Protector, Regulator, and Consumer (Provider) whenever
the benefits outweigh the costs.
S PROTECTOR: Laws to protect consumers, businesses,
workers, etc.
S PROVIDER: Goods/Services like defense, roads,
education
S REGULATOR: Preserving Competition (Break-up
monopolies

10. What is this picture a
metaphor of?
Why this picture?

11. Government’s Role in
promoting the Economic Goals
1. Employment: Helping to create jobs and reduce
unemployment
2. Growth: Increase the GDP by providing more
goods/services
3. Stability: Control economy to make it as predictable as
possible. *Limit Recessions *Reduce too much
inflation
4. Security: Protection against economic risks beyond our
control
5. Equity: Equal access to jobs/goods/services
6. Freedom: Help Markets to operate properly

12. EXAMPLES:
WHICH GOAL IS OUR GOVERNMENT TRYING TO
ACHIEVE?
S ANTI-TRUST LAWS
S Affirmative Action
S Price Regulations
S Government Contracts (government buying things)
S Unemployment Benefits
S Food and Drug Administration (FDA)
S Federal Reserve System (Banking/Money supply)