Economic Systems.Ppt Edited

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The document discusses different economic systems including capitalism, mercantilism, communism, socialism, and market economies. It provides background on the origins and key concepts of each system. Capitalism emerged in Europe during the Enlightenment and has roots in earlier mercantilism practices from Rome and the Middle Ages. Communism is based on Marxist philosophy as outlined in The Communist Manifesto. Socialism advocates for public rather than private ownership and control of resources. A market economy relies on supply and demand with little government intervention to guide economic decisions.

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Document #1: History of the Economic Systems and Theories Capitalism Capitalism is an economic system that emphasizes private ownership of the factors of production, freedom of choice, and individual incentives. These freedoms and incentives apply to workers, investors, consumers, and business owners. In pure capitalism, the government does not interfere with the economy—the wages of workers, the prices of goods, what producers can make, the ways that businesses make or sell their goods and services, or any other regulations. Capitalism assumes that the best way to serve society is to let people produce, sell, and buy as they wish. The goal of capitalism is to create what is called a free market. In economic terms, a market is not literally just a market like a grocery store. A market or marketplace is wherever all sorts of goods and services can be sold and bought. In a free market or free enterprise economy like that under capitalism, the government places no limits on the freedom of buyers and sellers to make their economic decisions. Origins of Capitalism The basic theories about capitalism and free trade come from Adam Smith. Smith was a Scottish philosopher and economist who lived in the 1700s. In his famous book The Wealth of Nations, Smith suggested the government take a laissez-faire approach to the economy. Laissez-faire is a French term meaning “to let alone.” Smith thought the forces of the marketplace would act as an “invisible hand” guiding economic choices for the best possible results. Competition plays a key role in a free-enterprise or free-market economy because sellers compete for resources to produce goods and services at the most reasonable price. If they are successful, they make more money. At the same time, consumers compete over limited products to buy what they want and need. Finally, these same consumers, now in their role as workers, compete to sell their skills and labor for the best wages or salaries they can get. Pure capitalism has five characteristics: private ownership and control of property and economic resources, free enterprise, competition, freedom of choice, and the possibility of profits. Free Enterprise in the United States A true and total capitalist system does not exist in reality. The United States, however, is a leading example of a capitalist system in which the government plays a role. Our society is deeply rooted in the value of individual initiative—that each person knows what is best for himself or herself. We also respect the rights of all persons to own private property. Finally, our society recognizes individual freedom, including the freedom to make economic choices. However, because the U.S. government also regulates many aspects of the economy, it does not have a purely capitalistic economy. Mixed Economies Economists describe the economies in the United States and many other nations as mixed economies. Mixed economies combine elements of capitalism and socialism. Mexico is ano ...

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