The Economy Overview

What is an Economy? The economy is the social institution that organizes a society’s production, distribution, and consumption of goods and services. Goods are commodities ranging from from necessities (such as food, clothing, and shelter) to luxury items (such as automobiles, swimming pools, and yachts). Services are activities that benefit people (including the work of priests, doctors, teachers, and engineers).

Capitalism Capitalism is an economic system in which natural resources and the means of producing goods and services are privately owned.

An ideal capitalist economy has three distinctive features: Private ownership of property Pursuit of personal profit Competition and consumer choice Consumers guide a market economy by choosing the goods and services that offer the greatest value.

Capitalism Few Regulations Competitive Attitudes Market determines what is best (sales) Competitive Attitudes “Justice” in a capitalist system amounts to freedom of the marketplace, where anyone can produce, buy, and invest according to self-interest.

Capitalism Success is Based On: Just like Social Darwinism Hard Work Intelligence Talent Just like Social Darwinism Survival of the fittest

Socialism Socialism is an economic system in which natural resources and the means of producing goods and services are collectively owned. A socialist economy rejects the 3 characteristics of capitalism in favor of the complete opposite: Collective ownership of property Pursuit of collective goals Government control of the economy

Socialism Businesses have less incentive to produce high quality products – Why??? “Justice” in a socialist context means not competing to gain wealth but meeting everyone’s basic needs in a roughly equal manner. Do you think the U.S. could ever become a socialist nation?

Capitalism vs. Socialism Greater productivity Higher overall standard of living Greater income inequality Freedom to act according to self-interest Socialism Less productivity Lower overall standard of living Less income inequality Freedom from basic want