1. American Free Enterprise System
Chapter 2 Section 3
Mr. Lindquist

2. Modern Systems All modern systems are “MIXED” or “BLENDED” Why?
Because all “Pure” systems have major flaws that need adjusting.
Government must play a role.
PURE COMMUNISM only exists in isolated pockets of the world

3. Difference between Mixed Capitalism and Socialism
Government regulates and subsidizes
People own the industry.
Taxes = lower %
EXAMPLES:
1. Energy
2. Transportation
Socialism:
Government ownership of industry to provides NEEDS
Taxes = Higher %
Allows free market to exist, BUT the government uses taxation to redistribute wealth and provide more services (EQUITY)

4. Profit Motive Keep the MONEY YOU EARN $$$$$$$$$$$$$$$$ BENEFITS:
Efficiency / Innovation / Creativity / Productivity

5. Competition
OPEN OPPORTUNITY
BENEFITS:
ALLOWS ECONOMIC MOBILITY

6. Private Enterprise (ENTREPRENEURSHIP)
LEGAL EQUITY  anyone can go into business for a profit GOV’T does NOT own things WE DO!!!!
BENEFITS:
Encourages “productive potential” to be reached.

7. Private Property
People own property / Government MUST Compensate you if taken away What happens when Private Property is GONE? Tragedy of the Commons
BENEFITS:
Provides incentive for wise use of resources
Do you want to waste your natural resources (land)?

8. Consumer Sovereignty Voluntary Exchange:
Buyers and Sellers work freely in the market
Ultimately the consumers decide what is produced.
BENEFITS:
Encourage competition and market variety

9. Government’s Role?
Assure that ALL 5 basic Principles (Pillars) remain in tact.
Protector, Regulator, and Consumer (Provider) whenever the benefits outweigh the costs.
PROTECTOR: Laws to protect consumers, businesses, workers, etc.
PROVIDER: Goods/Services like defense, roads, education
REGULATOR: Preserving Competition (Break-up monopolies

10. What is this picture a metaphor of?
Why this picture?

11. Government’s Role in promoting the Economic Goals
Employment: Helping to create jobs and reduce unemployment
Growth: Increase the GDP by providing more goods/services
Stability: Control economy to make it as predictable as possible. *Limit Recessions *Reduce too much inflation
Security: Protection against economic risks beyond our control
Equity: Equal access to jobs/goods/services
Freedom: Help Markets to operate properly

12. EXAMPLES: WHICH GOAL IS OUR GOVERNMENT TRYING TO ACHIEVE?
ANTI-TRUST LAWS
Affirmative Action
Price Regulations
Government Contracts (government buying things)
Unemployment Benefits
Food and Drug Administration (FDA)
Federal Reserve System (Banking/Money supply)