Chapter 6 Pump Primer Identify the two questions that help determine whether an economy is capitalistic or socialistic

Chapter 6 Economic Systems

Objectives Describe mercantilism Chapter 6 Objectives Describe mercantilism Describe Adam Smith’s contribution to economics Define laissez-faire liberalism Identify the two questions that help determine whether an economy is capitalistic or socialistic Describe each of the major forms of capitalism Describe each of the major forms of socialism Explain how free-market capitalism compares to scriptural principles Explain how socialism compares to scriptural principles

Chapter 6 Biblical Integration Christians should avoid coveting others' wealth, for God considers wisdom to be of more valve than wealth. (Ex.20:17; Prov. 16:16)

the ability to do or have the things that bring personal satisfaction Chapter 6 pp. 106-110 wealth the ability to do or have the things that bring personal satisfaction

goal = increase holdings of gold and silver Chapter 6 pp. 106-110 Mercantilism promoted the acquisition of precious metals, not as the means to an end, but as the end itself goal = increase holdings of gold and silver misled into thinking that stockpiling money was the same as accumulating wealth

Mercantilism: Five-Point Program Chapter 6 pp. 106-110 Mercantilism: Five-Point Program exploration: discover and seize new sources of good and silver trade: reach a favorable balance of trade domestic manufacturing: increase domestic manufacturing to produce more goods to sell abroad

Mercantilism: Five-Point Program Chapter 6 pp. 106-110 Mercantilism: Five-Point Program colonization: encourage colonizing new territories to acquire new supplies of the factors of production alliances/treaties/conquest: use foreign relations to minimize competition

Five-Point Program Problems Chapter 6 pp. 106-110 Five-Point Program Problems exploration plunder to reach this balance support privateers to steal from neighboring nations

Five-Point Program Problems Chapter 6 pp. 106-110 Five-Point Program Problems trade difficult to reach this balance domestic manufacturing limited amounts of goods available for purchase in home nation

Five-Point Program Problems Chapter 6 pp. 106-110 Five-Point Program Problems colonization increased tensions between the colonists and their monarchs alliances/treaties/conquest drove up prices and caused inflation

“Father of Laissez-Faire Economics” Wrote The Wealth of Nations Chapter 6 pp. 106-110 Adam Smith “Father of Laissez-Faire Economics” Wrote The Wealth of Nations

wealth = economic prosperity of the citizens mercantilist nation: Chapter 6 pp. 106-110 The Wealth of Nations wealth = economic prosperity of the citizens mercantilist nation: wastes itself to produce for others despised for its hostile practices

a treatise against mercantilism misconception = money is wealth money: Chapter 6 pp. 106-110 The Wealth of Nations a treatise against mercantilism misconception = money is wealth money: provides ability to purchase wealth provides no utility of itself is only a tool

from the French, to “let alone” Chapter 6 pp. 106-110 laissez-faire from the French, to “let alone”

Laissez-Faire Rulers Citizens leave subjects alone Chapter 6 pp. 106-110 Laissez-Faire Rulers leave subjects alone allow subjects to seek personal profit Citizens free to specialize in jobs free to exchange goods with one another

Criticism: creates a selfish, greedy, anti-social nation Chapter 6 pp. 106-110 Laissez-Faire Criticism: creates a selfish, greedy, anti-social nation Defense: seek out needs of others to profitably satisfy them “The Invisible Hand”

Modern Economic Systems Chapter 6 pp. 111-120 Modern Economic Systems Capitalism: economic freedom Socialism: state-controlled economies

Modern Economic Systems Chapter 6 pp. 111-120 Modern Economic Systems Two fundamental questions: Who owns the nation’s factors of production? Who answers the three economic questions?

Chapter 6 pp. 111-120 socialistic a central authority, committee, or the people in common own the factors of production and make nearly all significant economic decisions

Chapter 6 pp. 111-120 capitalistic private individuals own the factors of production and make almost all significant economic decisions

Economic Systems Socialism Capitalism less personal ownership Chapter 6 pp. 111-120 Economic Systems Socialism less personal ownership less personal decision-making Capitalism more personal ownership more personal decision-making

Chapter 6 p. 111

Most extreme form of capitalism Private citizens: Chapter 6 pp. 111-120 Radical Capitalism Most extreme form of capitalism Private citizens: own all the factors of production make all economic decisions have no government

Radical Capitalism Unscriptural Chapter 6 pp. 111-120 Radical Capitalism Unscriptural denies legitimacy of government (Rom. 13:1, 4) impractical free market cannot exist without government anarchy without government

Classic Liberal Capitalism Chapter 6 pp. 111-120 Classic Liberal Capitalism Adam Smith Government must exist, but with minimal control

Classic Liberal Capitalism Chapter 6 pp. 111-120 Classic Liberal Capitalism Responsibilities of government: to protect citizens from foreign aggression to protect the rights of its citizens from infringements by others to provide public goods

State Capitalism Citizens own: natural resources financial capital Chapter 6 pp. 111-120 State Capitalism Citizens own: natural resources financial capital labor

Government intervenes: Chapter 6 pp. 111-120 State Capitalism Government intervenes: decision-making process insuring egalitarian goals Welfare state: extreme state capitalism

State control of cornerstone industries Chapter 6 pp. 111-120 Social Democracy State control of cornerstone industries Private ownership of nonessential businesses highly regulated

large scale government ownership of a nation’s companies Chapter 6 pp. 111-120 nationalization large scale government ownership of a nation’s companies

selling nationalized businesses back to private stockholders Chapter 6 pp. 111-120 privatization selling nationalized businesses back to private stockholders

Centralized Socialism Chapter 6 pp. 111-120 Centralized Socialism National government: central owner decision maker Envisioned by Karl Marx

Centralized Socialism Chapter 6 pp. 111-120 Centralized Socialism Criticisms: destroys incentives for entrepreneurs eliminates incentives for individual workers to produce better goods and services creates shortages and black markets

Most extreme form of socialism Chapter 6 pp. 111-120 Communism Most extreme form of socialism Factors of production managed by everyone in common

Contrasting Capitalism and Socialism Chapter 6 pp. 111-120 Contrasting Capitalism and Socialism What does the Bible say? Supports for capitalism: the principle of personal, private ownership of property the principle of individual accountability for decisions (rewards and punishments)

Contrasting Capitalism and Socialism Chapter 6 pp. 111-120 Contrasting Capitalism and Socialism Instructions for business owners: treat employees with respect pay them a decent wage pay them on time Wealth should not draw us away from God