1. Social Institutions The Economy

2. Think about some of the experiences you have had at work (can be informal jobs like housework) With a partner, discuss your work experiences with each other. Explore the experience’s rewards and punishments, fairness, salary/rewards, difficulty, and other aspects. Prepare a summary to present to the class Learning Cycle on the Experience of Work

3. Use the information from the discussion to reflect on the nature of work in American society. Is work necessary, fulfilling, or alienating, rewarded or not? How do people’s experiences relate to concepts like alienation and identity to experiences like unemployment and poverty ? How might the nature of work change as the American economy continues to undergo transformation? Learning Cycle on the Experience of Work

4. To satisfy basic needs (food, shelter, clothing, education, etc) every society develops economic institutions Economic Institution : System of roles and norms that governs the production, distribution, and consumption of goods and services Need for economic institutions is rooted in the problem of scarcity Societies must decide how best to use their limited resources to satisfy the most needs and they do this by answering basic questions: Basic Economic Questions 1. What goods and services should be produced? 2. How should these goods and services be produced? 3. For whom should these goods and services be produced? How society answers these questions is determined by the available factors of production The Economic Institution

5. Factors of production : Resources that can be used to produce and distribute goods and services Include: Natural Resources Land, Water, Plants, etc. Human Resources Labor Capital Resources Money, Tools, Machinery, Buildings, etc. Factors of Production

6. All economic systems contain 3 basic sectors 1. Primary Sector Deals with extraction of raw materials from the environment Ex: fishing, hunting, mining, farming 2. Secondary Sector Concentrates on use of raw materials to manufacture goods Ex: Turning a log into a canoe 3. Tertiary Sector Emphasis shifts to the provision of services Ex: Doctor, Religious leader Degree to which 1 sector is emphasized over the other depends on a society’s available resources and its level of technology Ex: In technologically advanced societies, majority of workers are engaged in providing services The Nature of Economic Systems

7. Human labor and animal power = main source of energy Technology remains low As a result there is a relatively, inefficient system of food production so most of the population must engage in production of food As society moves from hunting and gathering base to an agricultural base, complexity of economic system increases As societies increase level of food production, full time participation in the secondary and tertiary sectors becomes more widespread Higher productivity allows more people to move labor from primary sector to the secondary and tertiary sectors without affecting food supplies Preindustrial Economic Systems

8. Main emphasis shifts from primary sector to secondary sector Shift brought about by introduction of machines and development of new sources of energy Advances in technology have consequences Increase in agricultural productivity Industrial societies can support larger populations Few workers needed in primary sector Change nature of work Jobs become more specialized which leads in increase in production People work for wages and use those wages to buy goods and services instead of creating goods and services for themselves Industrial Economic Systems

9. Tertiary sector becomes most important area of economy Factors that lead to this shift As technological innovations lead to more efficient production techniques, the number of jobs available in secondary sector begins to decline Emphasis on all forms of knowledge and on the collection and distribution of information creates a great demand for administrative, managerial, professional, technical, and service personnel Higher standard of living characteristic of advanced industrial societies increase the demand for services Postindustrial Economic Systems

10. There are 2 basic ideal economic models Capitalism Socialism Differences between the 2 depend on who owns the factors of production There is no pure form of either Economics can be arranged as: most capitalist  most socialist US, Japan, Canada = most capitalist Britain, France, Germany = in the middle Korea, China, Cuba = most socialist Economic Models

11. Capitalism = Factors of production are owned by individuals rather than by government Economic activity regulated by forces of profit and competition Self-interest regulates economy by guiding the actions of consumers and producers Market competition regulates economy by influencing the answers to the 3 economic questions (what, how, for whom) Prices by laws of supply and demand Economic Models: Capitalism

12. Law of Supply : Producers will supply ↑ products when they can charge ↑ prices and vice versa. Law of Demand : Demand for a product ↑ as the price of a product ↓ “Invisible Hand” : Interplay between forces of supply and demand (idea from Adam Smith) If government interference is at a minimum and competition is not restricted, the invisible hand of market forces will keep economy in balance This will lead to a Laissez-Faire Economy (Little to no government interference in business) which is pure capitalism Commitment to limited government control of business operations has resulted in labeling of capitalist economies as free-enterprise systems Economic Models: Capitalism

13. Functionalist Capitalism can bring about a prosperous and stable social order Adam Smith wrote that capitalism is based on the core belief that people are selfish and act to serve their own interests Private ownership is considered functional for society’s economic health because it motivates people to be efficient and productive and to use resources efficiently Conflict Capitalism threatens society by allowing a powerful wealthy class to exploit a weak poor class Marx saw efficiency of capitalism producing alienation and exploitation of labor Symbolic Interaction Focuses on how people’s definition of their world creates or supports capitalism The Economy in Perspective

14. Socialism : Factors of production are owned by the government which regulates all economic activity Economic activity is controlled by need and the government controls central planning 3 Basic Questions answered differently What to produce = determined by needs of society (if something is needed it is provided) How to produce = determined by central planners in government (only 1 variety of each good) For whom = determined by need rather than ability to pay Principles guiding are social equality and economic fairness Ultimate goal is communism (political and economic system in which property is communally owned) No social classes and role of government ↓ as people learn to work together Economic Models: Socialism

15. America does differ from pure capitalism model for 5 reasons 1. Rise of Corporation Capitalism Corporation : Business organization owned by stockholders and is treated by law as if it were an individual person Corporations changed the relationship between business ownership and control Few stockholders participate in daily business operations This shift of power from individual capitalist corporations is due to the growth of the oligopoly (a few producers control the industry) Protectionism : Use of trade barriers to protect domestic manufacturers from foreign competition (ex: tariffs, quotas) Free Trade : Trade between nations that is unrestricted by trade barriers Postindustrial America

16. 2. Globalization of the Economy Major consequence is that nations become economically interdependent and: Economic policies of 1 nation affect the policies of other nations Economic conditions in 1 nation tend to trigger economic and political events in other nations 3. Expanding Role of Government Growing population and rise of corporate capitalism in the 1800s led the government to assume more responsibility for the operation of the economy Principal among economic functions that the government serve are: Regulation of economic activity Protection of consumers (ex: FDA) Provision of public goods (goods and services that the government provides for everyone in society, like roads) Promotion of economic well-being Postindustrial America

17. 4. Changing Nature of Work America’s continuing shift from industrial base to a service base Due in part to advances in technology 5. E-Commerce Business conducted over internet Based on information and not tradition factors of production New way of doing business Postindustrial America

18. Native Americans Used to live off the land, but today most live on reservations and have worst economic straits of any ethnic group In recent decades, more have worked and gained money through casinos African Americans In the past, mostly lived in the South and worked as tenant farmers 1950s-1960s many moved North Today they still lag behind whites and discrimination still exists Many are starting their own businesses Social Diversity in the U.S. Economy

19. Hispanic Americans Have worked in low-wage jobs as farm and service workers Mexican Americans – have been exploited as agricultural workers in the Southwest and California Puerto-Rican immigrants brought skills to New York City Cuban Americans came to Florida with skills and are the most upwardly mobile group Asian Americans Most successful economic group Japanese Americans have become professional workers and scientists Chinese Americans work in white-collar jobs, but recent immigrants work long hours for low wages Korean Americans mostly work in grocery stores Most successful group is Asian-Indian Americans from India Social Diversity in the US Economy

20. With a partner or on your own: Think of type of business you would be interested in owning (the business must be LEGAL) Organize your business with the following information Name of business Location of business, type of building, décor Choose a logo for your business Blueprint of business (building) Products and/or services (A sample menu) Create a flyer that will announce your opening day and sales/special promotions Be prepared to present your business to the class Mind Your Own Business