New Economic Theories http://www.econlib.org/

Mercantilism previously the most popular economy import as little as possible export as much as possible having colonies was almost imperative for this economy to thrive Great Britain, Spain, & France were major powers that used this economic theory A nation’s power was directly related to its wealth Colonies=important because they provided cheap raw materials, paid taxes to the home country, and were a market for the finished goods

INSTRUCTIONS Read the page about your theory. Discuss with your group members what you feel are the most important parts of the theory. Consider these questions: What are advantages to your theory? What does your theory believe? What might be some disadvantages to your theory? After about 15 minutes, groups will present the basic, important fact of the theories.

Capitalism (Theory A) individual people have the right to own private property the government protects these individual rights ~ another name for this is laissez-faire economics Individuals have the right to own their own property, which means they can own & operate their own businesses Because the government protects these rights and does not control property or businesses, this economic theory can also be called laissez-faire economics.

Capitalism (Theory A) economic activity should not be regulated by the government economies using this theory have markets based on competition ~ businesses compete for sales/profit

Capitalism (Theory A) competition in the economy means that prices are often lower competition also means that items are probably of better quality when one business has most control of an industry  monopoly

Socialism (Theory B) government controls all means of production this theory promises: ~ economic equality ~ getting rid of poverty ~ abolishing the need for money Govt controlling all the means of production is the basic principle of theory b What do we know about promises?

Socialism (Theory B) a place that used this theory might have for the people: ~ a non-profit store ~ decent houses ~ good working conditions These things help those previous promises

Socialism (Theory B) government would decide when & how much of what to produce ~ products may not be of the best quality Would the government always make the right decision about how much of something to produce?

Communism (Theory C) very similar to Theory B Theory B is good, but that it will take too long to implement ~ wealthy people = big problem Theory B will take too long to implement Why would wealthy people be a big problem to changing an economy? What does the economy focus on? What do wealthy people have a lot of?

Communism (Theory C) the majority of people need to revolt & govern themselves the people would control all of the means of production The major difference between Theory B and Theory C is THEORY B BELIEVES THE GOVERNMENT SHOULD CONTROL ALL OF THE MEANS OF PRODUCTION THEORY C BELIEVES THE PEOPLE SHOULD REVOLT, PUT THEMSELVES IN POWER/GOVERNMENT, THEN TAKE CONTROL OF ALL THE MEANS OF PRODUCTION

Communism (Theory C) if the people control the government, they control the economy this theory focuses on “fairness” ~ a person doing heavy labor should not receive less pay than a person working in an office Economic planning is used in controlling the economy Government decides when & how much of what to produce in this theory as well

Look at your notes… Which theory do you think sounds best or worst? Which kind would you want to use if you could choose? WHY? With a partner, take turns writing on a sheet of paper (like you’re writing a note). Write about which theory you think is best or worst & why you think it is best or worst. Today not very many countries use one theory or another, unless it uses capitalism. Socialism and communism today, often do not control all of the means of production or they produce goods for worldwide market, such as China. China is open to foreign investment and has moved from a planned socialist economy to what they term socialist market economy

Example Person #1 “I think Theory ___ is the best theory.” Person #2 “I think Theory ___ is the best theory. Why do you think Theory ___ is best?” Person #1 “I think Theory ___ is best because ___. Why do you think Theory ___ is best?” Person #2 “I think Theory ___ is best because ___.

Theory A = Capitalism Theory B = Socialism Theory C = Communism