Capitalism Economic system in which investment in and ownership of the means of production, distribution, and exchange of wealth is made and maintained chiefly by private individuals or corporations, especially as contrasted to cooperatively or state-owned means of wealth.

What do you think this quote means? “The invisible hand at work within the market mechanism will ascertain that all the needs in society will be covered. Work is the basis for all well-being, while monopoly and cartels are obstacles for the beneficial processes.”invisible hand

Adam Smith Scottish Philosopher, 1723 – 1790 An Inquiry into the Nature and Causes of the Wealth of Nations (1776) “Invisible Hand” The “Invisible Hand” Self-Interestefficient Self-Interest guides the most efficient use of resources [laissez-faire] Public Interest is a “by-product”

Four [4] Components of Capitalism Land Land Labor Labor Capital Capital Entrepreneurship Entrepreneurship

Land “Gifts of Nature” The essential raw materials required to make a product.

Labor Those that produce the goods

Capital This does not mean $$$ [Although every business needs it] [Although every business needs it] Capital Good: A “good” that is used in the production of other goods. [e.g. Loom] Consumer Good: A “good” that is consumed by the general population [e.g. Clothes]

Entrepreneur Some one who: Has a good idea they think will generate a profit Has a good idea they think will generate a profit Has the means by which to produce it Has the means by which to produce it Is willing to “take a risk” Is willing to “take a risk”

Conclusion “Greed is Good” * “Greed is Good” * * Unrestrained, it is also BAD [We’ll talk about that in a future lesson]