Econ #1 and #2

  1. 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
  2. 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
  3. 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
  4. 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
  5. How does capitalism decide what to produce and how much?
    • Private property
    • free markets
    • competition and cooperation
  6. Private Property
    Private individuals own most property, not the gov’t or other social groups
  7. Free Markets
    • 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
  8. 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
  9. 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
  10. 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
  11. 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
Card Set
Econ #1 and #2
Econ #1 and #2