Capitalism

Elements of Capitalism  Private property rights –Private ownership of the factors of production  Market system –Price mechanism –Freedom of enterprise –Incentives: profit motives –Competition  Limited government (laissez-faire policy)

Strength and Weakness of Capitalism  Strength –Incentives  Efficiency –Innovations  Weakness –Income inequality –poverty

Income Inequality  How to measure –Lorenz curve –Gini coefficient –Quintile income share –Quintile ratio  International comparison –Global income dataGlobal income data –Global income distributionGlobal income distribution

Modifications of Pure Capitalism  Decline of laissez-faire and increasing government involvement –New deal policy during the Great Depression of the 30s –Monopoly and regulation –Antitrust laws (preventive measures) –Social regulation(pollution, sin taxes) –Social safety net (social security and welfare)

Capitalist Systems  Individualistic capitalism (U.S.)  Social market capitalism (western Europe)  State-directed capitalism (Japan and East Asian countries)