Econ #1 and #2
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Market capitalism (USA)
- Lots of respect for the free market
- Many gov’t regulations but gov’t intervention is relatively small
- Safety net is on the small side
- Few gov’t owned companies
- Main role is protect free market and help it work
Social market capitalism (Western Europe/Canada)
- Gov’t has stronger social welfare emphasis
- Strong social safety net
- Emphasis on worker rights
- Gov’ts have had nationalizations (takeovers) of important companies
State-directed capitalism (Japan/east Asian countries)
- Few state owned companies
- Few social welfare programs
- Safety net is small
- Gov’t tends to guide private companies but don’t control them
- Countries have “industrial policies”- which industries the country should move into
- Determine which industries prosper by directing who gets bank loans
Why is efficiency important?
- Don’t waste resources
- Why? We have limited resources and unlimited wants
- Use just enough resources for each item
- Produce goods/services cost-effectively
How does capitalism decide what to produce and how much?
- Private property
- free markets
- competition and cooperation
Private individuals own most property, not the gov’t or other social groups
- People are free to make their own decisions about how to use their property
- Individuals and organizations interact to make deals rather than gov’t dictating what to do
- Decentralize system where gov’t has a laissez-faire attitude
- Gives rise to demand and supply, tries to reach equilibrium
Competition and cooperation
- Capitalism has a lot of competition- workers for jobs, companies for customers
- Competition helps with efficiency
- Benefit from cooperation with others
- A company is a group of people cooperating
Who gets the results of production?
- Benefits are distributed based on whoever is best at competing and strategic cooperation
- Endowments matter too- what you start out with in the marketplace
- Luck also plays a role- lucky enough to bring a product to market at just the right time
How does it respond to changes?
- By using flexible cooperation aka resource mobility
- Resources are free to move as the economy changes
- People are free to use their property as they wish
- Freedom of enterprise
- People can move to new jobs
- Resource mobility- movement of resources from one activity to another
What is the government’s role in capitalism?
- Government should support but not replace the market, let market fix its own problems
- Roles Include: law and order, providing public schools, stabilizing the money supply and financial system
What would you like to do?
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