4 - 1 Capitalist Ideology Invisible Hand Three Fundamental Questions Market System

4 - 2 Capitalist Ideology Invisible Hand Three Fundamental Questions CAPITALIST IDEOLOGY FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION

4 - 3 Capitalist Ideology Invisible Hand Three Fundamental Questions FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY SELF- INTEREST COMPETITION LARGE NUMBERS ENTRY & EXIT CAPITALIST IDEOLOGY

4 - 4 Capitalist Ideology Invisible Hand Three Fundamental Questions MARKETS & PRICES FREEDOM OF ENTERPRISE & CHOICE PRIVATE PROPERTY ACTIVE, BUT LIMITED, GOVERNMENT SELF- INTEREST COMPETITION CAPITALIST IDEOLOGY

4 - 5 Capitalist Ideology Invisible Hand Three Fundamental Questions GLOBAL PERSPECTIVE Index of Economic Freedom, Selected Nations 1 Hong Kong 3 Ireland 5 United States 20 Belgium 31 Spain 48 France 101 Brazil 126 China 134 Russia 148 Venezuela 156 Cuba 157 North Korea FREE MOSTLY FREE MOSTLY UNFREE REPRESSED Rankings among 157 nations, 2008

4 - 6 Capitalist Ideology Invisible Hand Three Fundamental Questions Other Characteristics CAPITALIST IDEOLOGY Reliance on Technology and Capital Goods

4 - 7 Capitalist Ideology Invisible Hand Three Fundamental Questions Is technology always good? Creative Destruction PCs destroyed typewriters Cars destroyed carriages MARKET SYSTEM & PROGRESS

4 - 8 Capitalist Ideology Invisible Hand Three Fundamental Questions Other Characteristics Reliance on Technology and Capital Goods Specialization = Efficiency CAPITALIST IDEOLOGY

4 - 9 Capitalist Ideology Invisible Hand Three Fundamental Questions Other Characteristics Reliance on Technology and Capital Goods Specialization = Efficiency Division of Labor CAPITALIST IDEOLOGY

Capitalist Ideology Invisible Hand Three Fundamental Questions Other Characteristics Reliance on Technology and Capital Goods Specialization = Efficiency Geographic Specialization CAPITALIST IDEOLOGY

Capitalist Ideology Invisible Hand Three Fundamental Questions Use of Money Other Characteristics Reliance on Technology and Capital Goods Specialization = Efficiency Barter System Difficulties CAPITALIST IDEOLOGY

Capitalist Ideology Invisible Hand Three Fundamental Questions THE INVISIBLE HAND Adam Smith The Wealth of Nations 1776 When firms maximize their profits, they maximize society’s income.

Capitalist Ideology Invisible Hand Three Fundamental Questions Invisible Hand

Capitalist Ideology Invisible Hand Three Fundamental Questions The Three Fundamental Questions... THE MARKET SYSTEM AT WORK

Capitalist Ideology Invisible Hand Three Fundamental Questions Anything that makes a profit Consumer Sovereignty Dollar Voting WHAT WILL BE PRODUCED?

Capitalist Ideology Invisible Hand Three Fundamental Questions Productively Efficient Max output at min cost Any point on the PPC HOW WILL THE GOODS AND SERVICES BE PRODUCED?

Capitalist Ideology Invisible Hand Three Fundamental Questions Those willing to pay the price Where are prices determined? Markets WHO WILL GET THE GOODS AND SERVICES?

Capitalist Ideology Invisible Hand Three Fundamental Questions Marginal Analysis