Process Oriented Guided Inquiry Learning #2 Information 2: Creative Destruction- Entrepreneurs create new products or new methods of production - New ideas destroy old products and methods. Information 1: Entrepreneurs- People are who transform innovation into economic growth. They develop new methods of production or new products and change the industries. Critical Analysis Questions: Brainstorm a list of both jobs lost and jobs gained because of the A.T.M. and online banking. On net has the A.T.M. and other machines helped or hurt society? Apply the following Darwinian idea to creative destruction and to industry. It is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. Re-write idea so that it can applied to markets Brainstorm ways that businesses could use the power of government to prevent a changing environment. In other words how can people in government help people in business? Critical Analysis Questions: How do entrepreneurs improve standards of living? Why would some business not appreciate entrepreneurship? How may government encourage entrepreneurship? 4. How might government prevent entrepreneurship?

Information 3: "You must separate out being “pro free-enterprise” from being “pro-business.”- Milton Friedman Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. Often used to prevent dynamic competition from others “outside” the system. Higher standards on the quality of clothing. Yes or No Explain your logic: Approval of a trans-pacific trade deal that will allow for foreign clothing to enter the markets tariff-free. A new law mandating that all new clothing producers are licensed to make clothing. A government bailout to failing clothing companies. A law that requires testing and certifications on all buttons and zippers. A trade policy raising tariff on foreign goods by 45%. Critical Analysis Questions: Why is being pro-business different than being pro-free enterprise? Which is better having an abundance or scarcity? From a consumer’s perspective? From a businesses perspective? Apply your knowledge to determine if the businesses would be supportive of the following laws. Circle Yes or No Explain your logic- consider competition, impact on price, creative destruction, scarcity and abundance. Note: you should consider new businesses as well as pre-existing business.

Last class students in all three classes constructed towers out of marshmallows and toothpicks. The goal was to earn the largest total profit. All classes did a great job. The picture below was a common scene.

But last year one group did it differently . . .

Making Predictions Failure Successful $10,000 But what else? + $164,000 But what else? If we repeated the game would this be tried by others? Who do you think would be the first to suggest that there should be a rule against this type of construction? Why? $10,000 But what else? Should the government “bail out” these students? Why or why not

Entrepreneurs Transform innovation into economic growth. They develop new methods of production or new products and change the industries. But they must be aware of the risk of failing.

Creative Destruction Joseph Schumpeter Entrepreneurs create new products of new methods- New Creations and Destruction of the Old Efficient use of resources New in terms of methods, new improvements of old products, and entirely new products that turn the equilibrium of the markets on its ear. According the Schumpeter there are types of innovations that lead to change. Product Process Market Organizational These innovations increase standard of living but also change the economic landscape.

"You must separate out being “pro free-enterprise” from being “pro-business.”- Milton Friedman Why would someone who was such a strong advocate for free-enterprise make this comment?

Information 3: "You must separate out being “pro free-enterprise” from being “pro-business.”- Milton Friedman Crony capitalism is a term describing an economy in which success in business depends on close relationships between business people and government officials. Often used to prevent dynamic competition from others “outside” the system. Higher standards on the quality of clothing. Yes or No Explain your logic: Approval of a trans-pacific trade deal that will allow for foreign clothing to enter the markets tariff-free. A new law mandating that all new clothing producers are licensed to make clothing. A government bailout to failing clothing companies. A law that requires testing and certifications on all buttons and zippers. A trade policy raising tariff on foreign goods by 45%. Critical Analysis Questions: Why is being pro-business different than being pro-free enterprise? Which is better having an abundance or scarcity? From a consumer’s perspective? From a businesses perspective? Apply your knowledge to determine if the businesses would be supportive of the following laws. Circle Yes or No Explain your logic- consider competition, impact on price, creative destruction, scarcity and abundance. Note: you should consider new businesses as well as pre-existing business.

"You must separate out being “pro free-enterprise” from being “pro-business.” Almost every businessman is in favor of free enterprise for everybody else, but special privilege and special government protection for himself. As a result, they have been a major force in undermining the free enterprise system. Stop kidding yourself into thinking you can use the business community as a way to promote free enterprise. Unfortunately, most of them are not our friends in that respect." Milton Friedman