1. Traditional, Command, Market, and Mixed economies
Economic Systems
Traditional, Command, Market, and Mixed economies

2. Recapping the Industrial Revolution
Occurs in mid 18th century
Great Britain
Machines replace human workers
Spinning Jenny, Power Loom, etc
Enclosure Movements force people to the cities
Urbanization
People begin working in mills/factories
Make more money!

3. Recapping the Industrial Revolution
Factory work greatly increases production
Machines
Assembly Line (Ford – Model T)
Prices of manufactured goods go down
Money left over
Owners driven by profit!
Poor working conditions
People start to question best economic practices

4. The economy – Who/What/How?
What makes up an economy?
Everything associated with the production, distribution, and consumption of goods.
Who produces what?
How much is produced?
How much is the cost?
These are known as the means of production
Question: Who owns or controls the means of production?
Answer: Varies according to economic system in place

5. 4 Economic Systems
Traditional
Command
Market (or Free Market)
Mixed

6. Things to keep in mind regarding economic systems
Who/what determines what/how much is produced? (the means of production)
Who/what determines prices of goods?

7. Traditional Economic System
Used to describe undeveloped regions of the world
Remote villages
Free of centralized gov’t—at least as we see it
Think ‘Old School’
Based on tradition, custom, & inheritance
How it was done in the past is how it will be done in the future
Self-Sustained, subsistence farming
Produce what you/your village needs
Each person has a job/role
No real need for currency

8. Market Economic System (Free Market)
Economic system in which there is no economic intervention or regulation by the government
USA & UK = Examples
Capitalism = Free Market
Private individuals control the means of production
Examples of private individuals?
Who is not a private individual?

9. Market Economic System (Free Market)
True “free” market systems do not exist
Some regulation is in place to protect businesses, workers, and consumers
Examples:
Monopolies – When one individual or business controls all access to a certain good
Restricted by government laws
Minimum Wage

10. Adam Smith and the Invisible Hand
Where does the support for a free market or capitalist system come from?
The Wealth of Nations
Written by Adam Smith, 1776
Argued that free-market systems are most beneficial & productive
Argues that the economy is guided by an invisible hand
Economies regulate themselves based off of natural laws of supply & demand

11. Adam Smith & laissez-faire
Smith also championed laissez- faire economics
Though he never mentions it
Means: “let it be”
Implies: Leave it alone
No government regulation!
Free Trade
No tariffs
Government non-interference

12. Command (Controlled) Economic System
Economic system in which the state (or government) owns/controls all means of production
What is produced?
Who produces it?
Who determines prices?
Example = Communism
Former USSR
North Korea
China (sort of)
Based on the idea that all people should be equal
No social/economic classes

13. Why the support for command systems?
Where does the support for Command economies or Communism come from?
Poor working conditions during early stages of Industrial Revolution
Low Wages
Very few wealthy people, man impoverished
Middle Class starts to expands
Workers and some owners start to question the conditions in the workforce

14. Karl Marx & the Communist Manifesto
Contains Marx’s theories on society and politics
Argues that history is a history of class struggle.
Examples:
Freed man v. slave
Lord v. Serf
Rich v. poor
Oppressor v. Oppressed
Argues that Capitalism continues this class struggle

15. Class Struggle in Capitalism
Marx argues that the struggle in capitalism takes place between those who on the means of production (think employers, business owners) and the laborers (workers).
Bourgeoisie (owners) vs. Proletariat (workers)
Eventually, the Proletariat will rise to power and overthrow the Bourgeoisie
Through rebellion or labor unions
Leads to Communism
Everybody equal
See why communism was feared in the US???

16. Issues with Communism In a true Utopian society:
Everyone has everything they need.
Historically, communism has not been successful.
Failed USSR
North Korea
China is more capitalist than communist
Government’s typically cannot provide for all the citizens
Little motivation to work hard/ become educated

17. Mixed Economic Systems
Economic system in which the state (government) controls key industries, but the rest are controlled by private individuals.
AKA – democratic socialism
Examples: Sweden
Some might say USA
Goal: To provide more equal distribution of wealth
Marx saw Socialism as the step between capitalism and communism