1. Q1-Define a state, and explain several key features found within a state.
Fundamentals for a State
What’s a State?
State-political community that occupies a definite territory with an organized government
Nation- any group of people united by common race, language, custom, tradition, and sometimes even religion
Example: United States of America
No common race, English, Shaking hands, 4th of July, No Religion
Popular use of term nation fits the standard definition of a state
Nation-state: when political and geographical boundaries are the same
Example: France even though not all inside borders are of French descent
Territories of both the nation of France and state of France coincide
Answers to no other higher authority
Features of a State
Population: agreement about basic beliefs=stability
Territory: Established borders
Sovereignty: supreme and absolute authority
Government: the institution which maintains social order, provide public services
Principles of Government
The State
Aristotle a scholar in ancient Greece was one the first students of government
Studied the polis, the ancient Greek city-state, and many of the terms and concepts of government such as politics, democracy, and republic originated in ancient Greece and Rome
Familiar terms country and state have basically the same meaning
Word state comes from a form of Latin word stare meaning “to stand”
Today word state precisely identified a political community that occupies a definite territory and has an organized government with the power to make and enforce laws without approval from any higher authority
Citizens of the United States have different meaning for the word state
United States is one of close to 200 states in the world today
Name United States was first used in 1776 when 13 British colonies declared independence from Britain
At that time each state though of itself as a separate country
Later the states joined as one nation under constitution the term state remained to describe the main political units within the United States
Term nation is often used to describe an independent nation or country
Nation is any sizable group of people united by common bonds of race, language, custom, tradition, and sometimes religion
For example although not all citizens of France are of French decent, the territories of both the nation of France and state of France coincide which would be called a nation state
Not all groups that consider themselves to be nations have their own states
Eastern Canada, includes many French-speaking Catholics who prefer to follow French culture and traditions rather than English speaking non-catholic majority of Canada
Some of these people want to break away from Canada and establish own state
On the other hand in Africa, populations of some national groups are divided among several African states which results from artificial borders established during colonial era
Popular use of term nation however fits that standard definition of a state
For this reason the terms nation and state are interchangeable
Essential Features of a State
States that make up today’s political world share four essential features
Population
Most obvious essential for state is people, and nature of states population affects stability
States where population share general political and social consensus, or agreement about basic beliefs have stable governments
For example, most Americans share basic beliefs about value of democratic government
Another way population affects political organizations of state is through its mobility
Millions of Americans move every year resulting in a change of political power
A major shift in population from the North and East to South and West caused Southern and Western states to gain representatives in Congress based on the census
While some North and East states lost representation
Movement of some of the population from inner cities to suburban areas resulted in a similar shift in political power
Territory
A state has an established boundary
United States continental boundaries are the Atlantic and Pacific oceans and recognized borders with Canada and Mexico
Exact location of political boundaries is often source of conflict among states
Territorial boundaries may change due to war, negotiations or purchase
Sovereignty
Political sovereignty means that the state has supreme and absolute authority within its territorial boundaries
It has complete independence, complete power to make laws, shape foreign policy and determine its own course of action, at least no state has right to interfere with internal affairs of another state
Because every state is considered sovereign, every state is equal with respect to legal rights and duties-at least in theory
In practice states with great economic strength and military capabilities have more power than others
Government
Every state has some form of government
Government is an institution which the state maintains social order, provides public services, and enforces decisions that are binding on all people living within the state

2. Q2-Describe the four theories on the origin of political communities, differentiating Thomas Hobbes and John Locke’s theories
Theories of the Origin of the State
Evolutionary Theory- belief that the state evolved from the family
Force Theory-government emerged when people of an area were brought under the authority of one person or group
Divine Right Theory- Idea that the gods have chosen people to rule
Social Contract Theory-By contract people surrendered to the state the power needed to maintain order, and in turn the state agreed to protect the people
Thomas Hobbes was one of the first to theorize on the Social Contract
He wrote in state of nature no government existed
Hobbes believed the people did not have right to break this contact or agreement
John Locke took the Social Contract a step further
Locke defended Parliaments overthrow of the King
Wrote that people were naturally endowed with the right to life, liberty, and property
To preserve their rights, they willingly contracted to give power to governing authority
When government failed to preserve the rights of people the people had right to break contract
Theories on the Origin of the State
How did the state or government come to be?
No one knows how or why people created the earliest forms of government and scholars have constructed several theories to explain the origin of the state
Evolutionary Theory
Some scholars believe that the state evolved from the family and this is the basis of the evolutionary theory
The head of the primitive family was the authority that served as a government
An extended family might include hundreds of people
Abrahams descendents in Old Testament of the Bible are an example of the emergence of this kind of rule
Gradually the large, extended family needed more organization
Force Theory
In earliest civilizations, people worked together to build city walls, control floods, and construct buildings for worship
Also cooperated in other ways, leaders issued decrees and soldiers went to war to protect their city
Some scholars believe that the state was born of force
Force theory says government emerged when all people of an area were brought under authority of one person or group
Divine Right Theory
Notion that a god or gods have chosen certain people to rule by divine right
The Egyptians, Chinese, and Aztecs were among those who believed that their rulers were either descendants of gods
By middle of the 1600s in Europe, monarchs often referred to their right to rule as coming from god and those born to royalty were chosen by God
To oppose the monarch was to oppose God and was considered treason and a sin
Social Contract Theory
In 1600s Europeans began challenging rulers who ruled by divine right
Were often supported by the writings of philosophers who believed that the origin of the state was in social contract
Thomas Hobbes was one of the first to theorize on the Social Contract
He wrote in state of nature no government existed
Without which life was nasty and brutish and their existed no authority to protect the people
By contract people surrendered to the state the power needed to maintain order
In turn the state agreed to protect the people
Hobbes believed the people did not have right to break this contact or agreement
John Locke took the Social Contract a step further
1688 British Parliament forced King James II out of office and invited William and Mary of Orange to rule
Locke defended Parliaments overthrow of the King
Wrote that people were naturally endowed with the right to life, liberty, and property
To preserve their rights, they willingly contracted to give power to governing authority
When government failed to preserve the rights of people the people had right to break contract

3. Q3-Justify the purpose of a state as a political community and giving examples for each purpose.
Maintain social order
By implementing and enforcing laws
John Locke, Two Treatises of Government
Provide public services
Like building sewers, and highways, or inspecting meat and produce
Provide national security
Protect against attacks from other states
To make treaties with other nations
Provide for and control the economic system
Pass and determine laws that the economic environment of the nation
Stimulate economic growth by controlling inflation, encouraging trade, and regulating natural resources
The Purposes of Government
Governments serve several major purposes for a state
To maintain social order
Provide public services
Provide for and control the economic system
Provide for national security and a common defense
In carrying of these tasks government must make decisions that are binding on all citizens
Government has authority to require all individuals to obey these decisions and power to punish those who don’t
Decisions of government are authoritative and thus enforced on all citizens
Governments derive power from two sources
Ability to use coercive force and legitimacy which means the willingness of citizens to obey government
In democratic countries legitimacy is based on consent of the people
Americans understand that if their officials fail to respond to their interests of people they can be voted out of office
Therefore the people entrust power to the people
Maintaining Social Order
Coercive force derives from the police, judicial and military institutions of government
John Locke explained in Two Treatises in 1690 that men consent to government
According to the social contract theory people need government to maintain social order because men have not learned to live without conflict
There are many sources of conflict in any group
Two people may argue over the boundary line between their properties
Members of community may disagree about what is best for the group
Any group member may try to take unfair advantage of others and conflict is inescapable
Governments provide way of resolving conflicts among group members, helping maintain social order
Governments have authority to make and enforce laws
Governments also provide structures such as courts to help people resolve disagreements in orderly manner
Governments make groups do things they might not have voluntarily like pay taxes or serve in army
Without government civilized life would not be possible
Governments control and contain conflict between people by placing limits on what individuals can do
Governments provide law and order
Providing Public Services
Effective governments allow citizens to plan for future, get education, raise and live an orderly life
One of important purposes of government is to provide essential services that make community life possible and promote general welfare
Governments also undertake projects like building sewer systems
Also provide services by making and enforcing laws that promote public safety, health, and services
State legislators require people to pass driving test
Inspectors check meat and produce to prevent the sale of spoiled food
Providing National Security
Third task of government is to protect people against attack by other states or threats such as terrorism
National security is a major concern of a sovereign state
On top of protecting nation from attack the government handles relations with other nations
Today’s world of nuclear weapons, spy satellites, international terrorists, and huge armies make the job complex
U.S. Constitution gives government control of monopoly over nations dealings with foreign nations
Thus our national government has exclusive power to make treaties
Government helps to provide economic security by enacting trade agreements with other nations
Some state maintain informal relations for trade and cultural purposes
National government has power to limit arrangement
Making Economic Decisions
Nations vary in ability to provide citizens with economic opportunities or resources
No country provides every citizen with everything they desire
Even wealthy country like U.S. there are citizens who are poorly clothed, housed, and fed
Problem of scarcity is far greater in other countries around the world
Material scarcity is often the cause of conflict in society
Countries in which difference between rich and poor often have civil unrest
This has been cause of several full blown revolutions
Governments not only intervene in domestic crises but also the economic affairs of other nations
For this reason government often intervene to reduce the causes of conflict
For example during WWII the U.S. aided countries economically in which they believed would fall to communism
Governments pass laws that shape economic policy of nation
Laws could be like providing a national currency or extensive as controlling all individual economic decisions
Governments may also make decisions that distribute benefits and public services among citizens
For example the government can offer tax incentives to farmers raising certain crops or industries producing certain products
Government decision to build veterans hospital in town and not other benefits some of the people and not others
Government try to stimulate economic growth and stablitiy through controlling inflation, encouraging trade, and regulating the development of natural resources

4. Doesn’t mean only one level of government
Q4-Define similarities and differences in a unitary and federal system of government.
Unitary system- all key powers to the national or central government
Doesn’t mean only one level of government
But central government creates state, provincial or other local gov’t and gives them sovereignty
Federal system- divides all key powers between national and state or provincial governments
Each level of government has sovereignty in some areas
United States began with confederacy-loose union of independent states
This failed and we drafted constitution making national government supreme
Federal governments include Canada, Switzerland, Mexico, Australia and India
The Formation of Government
The relationship between nations central government and its smaller governments can be described as unitary or federal
Unitary Systems
A unitary system of government gives all key powers to the national or central government
Means that the central government has power to create state, provincial or other local government and give them sovereignty
Doesn’t mean there is only one level of government
Federal System
Great Britain, France, and Italy developed unitary governments when they emerged from smaller kingdoms
A federal system divides powers between the national and state and provincial governments
U.S. developed a federal system after the 13 colonies became states
Each level of government has sovereignty in some area
To begin with, the United States formed a confederacy, loose union of state that are each independent
Today countries with federal systems include Canada, Switzerland, Mexico, Australia, India, and Russia
When confederacy failed to provide an effective central government the constitution was created making federal/national government supreme while preserving some state government powers
Constitutions and Government
A constitution is a plan that provides the rules for government
Constitutions serve several majors purposes
Establishes basic structure of government and defines governments powers and duties
Sets out ideals that people believe in and share
Provides supreme law for country
Constitutions may be written or unwritten; most modern states constitutions are written
Constitutions provide rules that shape the actions of the government and politics
US constitutions written in 1787 is oldest written constitution still active today
Britain has an unwritten constitution based on hundreds of years of legislative acts, court decisions and customs
Other nations with written constitutions France, Switzerland, India, Italy
All governments have a constitution in the sense that they have some plan for organizing and operating government including the People Republic of China
Term constitutional government however has special meaning and refers to a government in which constitution has authority to place clearly recognized limits on the powers of those who govern
Thus constitutional government is a limited government
Incomplete Guides
Despite the Peoples Republic of China having a written constitution there are very few limits on government power
Constitutions are important but incomplete guides to how a country is actually governed
First no written constitution can spell out all the laws, customs, and ideas that grow up around the document
For example when FDR was elected four times to president it was custom not law that a person not be elected more than twice
Second a constitution doesn’t always reflect the practice of government in a country
Only when 22nd amendment was passed was a president not limited to two terms
For example the Peoples Republic of China has written constitutions about basic freedoms and duties of citizens
Yet the Chinese government has maintained an extensive police force to spy on and punish citizens whose ideas are not acceptable to the state
A Statement of Goals
Government relaxed in late 1980’s authorities crushed pro-democracy movement in 1989
Constitutions typically contain a statement that sets forth the goals and purposes of government
Framework for government
Preamble is a statement of goals and the U.S. constitution sets the major goals of government
Main body of constitution sets out the plan for government
In federal state a constitution also state relationship between the national and state governments
Main body is typically divided into articles and sections
Also describes how to amend or change the constitution
Indian constitution, the longest in the world consists of hundreds of articles
French Constitution has 89 articles and 16 titles
U.S. Constitution has 7 articles and 21 sections
Highest Law
Constitution provides supreme law for states
Constitution is usually considered superior and morally binding force
Politics and government
Constitutional law involves interpretation and application of constitution primarily concerns defining extent of government powers and limits of government and citizens
Draws authority from people chosen in assembly by the people
Effort to control or influence conduct and polices of government is called polices
In fact a major political struggle developed over ratification of constitution and in a few years political parties formed and played key roles in election
Constitution did not prevent development of politics because they are closely related
People are taking part in politics when they join protest group of higher taxes or when they meet with major and ask city to repave streets in neighborhoods
Seeking Government Benefits
Legislation are acting politically when they vote to have government building built in districts they represent
Participation in politics when people realize that government has ability to influence their ideas
Different people make different demands on government
Construction workers want government to support building new highways to create jobs
In large diverse nations like the united States people struggle over benefits and services government should provide
Constructionist may want government to spend money on mass transit and parks
Through government and politics groups seek groups to max benefits received from government
Also seek to turn their beliefs into public policy
For example one group seeks to influence government to ban smoking in public places; others seek to pressure government not to ban smoking
Importance of politics
As people seek towards and benefits politics provided a way for them to compete against each other
Politics allow conflicts in society to be managed in a peaceful manner
Special Interests
Outcomes of government affect key matters like quality of air and water, economic conditions, peace and war, and citizen rights and freedom
Constitution says government should promote the general welfare
Farmers believed government should operate in the interests of all people not favoring any group
Governing in complex world
Some people equate government with bribery or corruption and believe the general welfare may be sacrificed for wants by special interest
They were concerned that groups of people united by common interests would hinder new government
US government conducts policy in complex world, changing relationships challenge the policies of every nation and is not easy to define boundaries of government
Major inequalities among states
Because of great inequalities among countries the world is full of contrasts
The US and about 20 others such as Japan, Canada, Australia, and France are industrialized nations
Developing nations are beginning to develop industrially
Industrialized nations have large industries and advanced technology that make life comfortable
More than a 100 developing nations have average per capita or per person incomes that are fractions of industrialized nations
Many states of Africa South of Sahara and of Southeast Asia are developing nations
In poorest nations starvation, abuse, and political turmoil are a way of life
Between these 2 levels of nations are newly industrialized nations such as Mexico, Singapore, South Korea, Malaysia, Algeria
To begin with the United States formed a confederacy, loose union of states that are each independent.
When confederacy failed to provide an effective central government the Constitution was created making federal/national government supreme while preserving some state government powers
Today the federal systems include Canada, Switzerland, Mexico, Australia, India, and Russia

5. Constitution & Governments
Constitution plan that provides rule for government and equals a limited government
Three Purposes
Set out ideals that people believe in and share
Establishes basic structure, powers, and duties of government
Provides supreme law for country
Constitutional government
A government in which a constitution has authority to place clearly recognized limits on the powers of those who govern
Written Constitution-outlines organization and the powers of a government
Unwritten constitution
Based on hundreds of years of legislative acts, court decisions and customs

6. Continued… Preamble Structures for Government Highest Law Politics
Most constitutions contain a statement that sets forth the goals and purpose to be served by the government
Structures for Government
Main body of a constitution is typically divided into parts called articles and sections
Highest Law
Constitutional law-constitutions provide the highest law of the land
Involves interpretation and application
Politics
Effort to control or influence the conduct and policies of government
Seeking Government Benefits
Importance of Politics
Through politics conflicts in society are managed
Special Interests
Government should promote the general welfare and thus act in the interest of all people not just favoring any special group

7. Q5-Describe the components of three types of government, analyzing the components found in democracy
Autocracy-Any system of government in which power and authority are in hands of an individual
Totalitarian Dictatorship
Ideas of single leader are glorified
Government seeks to control social and economic life
For example: Adolf Hitler’s government in Germany and Benito Mussolini’s rule in Italy
Monarchy-king or queen or emperor exercises supreme power and usually inherit powers
Absolute monarchs have complete and absolute powers
For example: King of Saudi Arabia
Constitutional Monarchs have shared powers with elected legislator and serve as ceremonial leaders of government
Oligarchic a system of government in which a small group hold power
Derives power from wealth, military, power, social positions, or combination
Sometimes even religion is source of power
People Republic of China

8. Q5- Continued…
Democracy- any system of government in which rule is by the people
Greek : Demos means people and Kratia- means rule
Direct democracy-people govern themselves by voting on issues individually
Town meeting in New England
No nation has a direct democracy
Indirect or Representative democracy- people elect representatives and give power
Practiced in cities, states, provinces, and counties where population is too large to meet regularly
Republic voters are the source of governments authority
Elected representatives who are responsible to the people exercises that power
Not every democracy is a republic
For example: Peoples Republic of China
Characteristics of Democracy
Individual liberty- be as free as possible
Majority rule with Minority rights
For example: Japanese Relocation Camps in World War II
Endo vs. United States
Free elections
One person, one vote
Can express thoughts freely
Secret ballot safe from coercion
Competing political parties
Keys to Success of Democracy
Active Citizen Participation
A favorable Economy
Free enterprise
Widespread Education
Strong Civil Society
Civil society
Social Consensus
Types of Government
Governments can be classified in many different ways, usually its by the time honored tradition used by Aristotle who asks the key question: Who governs the state?
Autocracy
Any system of government in which power and authority are in hands of an individual
Several forms of autocracy exist
Historically autocrats have maintained authority by inheritance or ruthless use of military or police power
Totalitarian dictatorship
Government seeks to control social and economic life
Ideas of single leader are glorified
Monarchy
For example: Adolf Hitler’s government in Germany and Benito Mussolini’s rule in Italy
King or queen or emperor exercises supreme power and usually inherit powers
Absolute monarchs have complete and absolute powers
King of Saudi Arabia for example is absolute monarch
Constitutional monarchs have shared powers with elected legislator and serve as ceremonial leaders of government
Absolute monarchs are rare but were prominent from
Oligarchy
For example countries like Great Britain, Sweden, Japan, and Netherlands
A system of government in which a small group holds power
Sometimes religion is sources of power
Group derives power from wealth, military power, social positions, or combination
Today government of communist countries like China are mostly oligarchic
Both dictatorships and Oligarchies claim they rule for people
In communist countries leader s of Communist party and armed forces control government
Such government might try to give appearance of control by people by holding elections
Democracy
As in dictatorships, oligarchies usually suppress all political opposition sometimes ruthlessly
May also have legislature elected by or representing the people
Any system of government in which rule is by the people
Democracy come from Greek word demos “the people and kratia meaning rule
Ancient Greeks used word democracy to mean govern by many contrasts
Pericles a great leader of ancient Athens declared “Our constitution is named a democracy because it is not in the hands of a few but of the many
Direct Democracy people govern themselves by voting on issues individually as citizens
Key idea of democracy is that people hold sovereign power
Key idea of democracy is that the people hold sovereign power
Direct Democracies only exist in small societies whose people can regularly to decide issues and problems
No government has a direct democracy
Still use in some New England towns meetings and smaller states called cantons of Switzerland
An indirect or representative democracy the people elect reps and give them responsible and power to make laws and conduct government
It is most efficient way to ensure that the rights of individual citizens are represented
Representative democracy is practiced in cities, states, provinces, and countries where population is too large to meet regularly in one place
An assembly of the peoples representatives may be called a council, a legislature
Republic voters are the source of governments authority
Elected representatives who are responsible to the people exercise that power
For most Americans today terms representative democracy, republic, and constitutional republic mean same thing: system where the people are ultimately the source of government authority
Ben Franklin believed that founders preferred republic requires citizens participation
Characteristics of Democracy
Great Britain for example is a democracy but not republic because it has a constitutional monarch as head of state
Should be understood that throughout world not every democracy is a republic
Today some national of the world misuse the word democracy
Many call themselves democratic or republican even if they are not
For example the government of North Korea is an oligarchy, because of a snall number of Communist Party leaders run the government
Individual Liberty
Yet their country is called a Democratic Republic of Korea, but has very few of the characteristics of a democracy
No individual, of course, can be completely free to do absolutely anything he or she wants which would result in chaos
Majority Rule with Minority Rights
Government must ensure all people have equal opportunity to develop their talents to the fullest
Rather, democracy require all people to be as free as possible
Democracy also requires that government decisions be based on majority rule
Representative democracy means that laws enacted in legislative represent the will of the majority
People in democracy usually accept decisions made by voters in free elections
At same time American concept of democracy includes tyranny of the minority
Because lawmakers are elected by the people, the laws are accepted by the people
Respect for minority rights can be difficult to maintain, especially when society is under great stress
Constitution ensures the rights of minority will be protected
For example during World War II the government imprisoned more than 100,000 Japanese Americans in relocation camps because it feared they would be disloyal
Relocation program caused severe hardships for many Japanese Americans and deprived them of their basic liberties
Endo vs. United States
Even so the program was upheld by the Supreme Court in 1944 in Korematsu v. United States and in one other similar case
In same year as Korematsu case, Supreme court did uphold the rights of Misuye Endo
Endo was a native born citizen and was fired from a California state job and sent to the relocation center
Her lawyer challenged the War Relocation Act right to detain loyal American citizens and case reached the Supreme Court in 1944
Day after the exclusionary order was revoked by the military commander, the court ruled that Endo be released from custody
In recent years the war relocation program has been criticized and used to show that even in the most democratic societies tyranny can occur
Free Elections
Democratic governments receive their legitimacy by consent of the governed
All democracies have free and open elections because they give people the chance to choose their leaders and voice their opinions on various issues
Authority to create and run governments rest with the people
Several characteristics mark free elections
Free elections also help ensure that public officials pay attention to the wishes of the people
First everyone's vote carries same weight, or one person, one vote
Four legal requirements such as age, citizenship, and residence are kept to a minimum
Third citizens are free to help candidates or support issues
Second all candidates have the right to express their views freely to give voter competition of ideas
Thus racial, ethnic, religious or other discriminatory tests cannot be used to restrict voting
Competing Political Ideas
Fifth, citizens may vote freely by secret ballot, without coercion or punishment of their voting decisions
A political part is a group of individuals with broad common interests who organize to nominate candidates for office, win elections, conduct government, and determine public policy
Rival parties make elections meaningful and give voters a choice among candidates
Soil of Democracy
Also help simplify and focus attention on key issues
Democratic government is more likely to succeed in countries which to some degree meet certain criteria that reflect the quality of life of citizens
Active citizen participation
Countries in which citizens are able to inform themselves about issues, vote in elections and to run for government office are more likely to maintain a strong democracy than governments where citizens do not participate
Requires citizens who are willing to participate in civic life
A Favorable Economy
Democracy succeeds better in countries that do not have large discrepancies in rich and poor and have a large middle class
Opportunity to control ones economic decisions provides a base for making independent political ideas
Countries with stable, growing economies seem better able to support democratic government
If people don’t have control of their economic lives, they will not likely be free to make political decisions
In US this economic concept is called free enterprise
In the past advocates who promised food and jobs have toppled may democratic governments during severe economic times
Widespread Education
People who are out of work or unable to feed their families are more concerned about their voting rights and political rights
Strong Civil Society
Democracy is more likely to succeed in countries with an educated public
Democracy is not possible without a civil society, a complex network of voluntary associations, economic groups, religious organizations, and many other organizations that exist independently
United States has thousands of organizations, Red Cross, the Human Society, Sierra Club, National Rifle Association, local church, newspapers all make it possible for citizens to make their views known to the government
A Social Consensus
Democracy also prospers where most people accept democratic values such as liberty and equality

9. Q6-Define capitalism, analyzing several key components of the economic system.
Economic Theories
Role of Economies
What and how much should be produced?
How goods and services should be produce?
Who get goods and services that are produced?
Capitalism
Origins of Capitalism
No one invented capitalism it gradually developed from economic and political changes in medieval and early modern Europe
Two important concepts of capitalism
People could work for economic gain
Wealth should be used aggressively
Adam Smith, Wealth of Nations written in 1776
Laissez-faire or Let alone
According to philosophy government should keep hands off economy
All government does is ensure competition in free market
Components of Capitalism
Types of Economy: Market Economy
Private Ownership: Productive Property and Means of Production assures decentralized decision making
Free Market: Individuals are free to start and run their businesses
Competition among Business: Helps to hold down prices and keep quality high = Supply and Demand
Freedom of Choice: Consumers, entrepreneurs, and workers enjoy freedom of choice
Economic Theories
The Role of Economic Systems
Governments around the world provide for many kinds of economic systems
Economics can be defined as the study of human efforts to satisfy unlimited wants through the use of limited resources
Must through the use of limited resources
Who gets goods and services that are produced?
How goods and services should produced?
What and how should be produced?
Capitalism
One end of spectrum is an economic system in which freedom of choice and individual incentive for workers, investors, consumers, and business entreprises is copied
Government assumes society is best served by any productive economic activity that individuals freely choose
Pure capitalism has five characteristics
Systems referred to as free enterprise or capitalism
Free enterprise
Private ownership and control of property and economic resources
Freedom of choice
Competition among businesses
Origins of Capitalism
Possibility of profits
No one invented capitalism it gradually developed from economic and political changes in medieval and early modern Europe
Two important concepts laid foundation for market system
Wealth should be used aggressively
People could work for economic gain
Major changes occurred with the opening of trade routes to the east in thirteenth century
1776 Adam Smith provided a philosophy for new system in his book Wealth of Nations
Free market means a situation in which the government placed no limits on the freedom of buyers and sellers to make economic decisions
By 18th century Europe had national states, wealthy middle class familiar with money and markets and new attitude toward work and wealth
In a free enterprise or pure market economy, economic decision are made by buyers (consumers) and sellers (producers)
In laissez-faire governments role is strictly limited to those few actions needed to ensure competition in market place
From writings of Smith and other came idea of Laissez-faire “a let alone”
Sellers own businesses that produce goods and services
Competition plays key role in free enterprise
This question of what to produce is determined by buyers and sellers and not government
Buyers pay for those goods and services that they believe best fits their needs
Sellers compete with one another to produce products at reasonable price
At same time buyers compete with one another to buy what they want and need
Sellers also compete for resources
Free Enterprise in United States
Same consumers try and sell their skills as labor for best wage or salary they can get
United States is leading capitalist nation where government has little role
No nation in would has pure capitalist state
Governments main economic task is to maintain free market
Government Influence
National government has tried to promote and encourage business competition and private property ownership
Since early 1900s government influence has increase in several ways
Second since 1900 United States government has regulated economy for various purposes
First as nation has grown it has become the largest buyer of goods and services in country
Since then many laws have passed give government a role in area such as labor management relations, environmental pollution and control over many banking and investing practices
Consumer protection=Pure Food and Drug Act
Third since Great Depression the government
Since this disaster left many Americans without jobs the government has created the Social Security Act to protect citizens
Mixed market economy
Today the American economy and other economies are described by economists as mixed market economy
Mixed market is an economy in which free enterprise is combined with and supported by government decisions in market place
Even though it is a mixed market economy American economic system is rooted deeply in individual initiative-that each person knows what is best for themselves
Government keeps competition free and protects public interests
It recognizes that freedom to make economic choices is a part of the freedom of political choice
Further it respects all person rights to own property

10. Type of Economy: Command Socialism EVOLUTION
Q7-Compare socialism and communism, explaining all characteristics of the economic system.
Communism
REVOLUTION
Type of Economy: Command
Labor theory of Value
Bourgeoisies
Wealthy Owners
Proletariat
Workers
Dictatorship of the Proletariat
Socialism
EVOLUTION
Type of Economy: Command Economy-government sets goals for production
Nationalization: Centralized decision making by government
Public Services and the Welfare State: guarantee public welfare by providing for the equal distribution of necessities and services
Political and Economic philosophy
Socialism is an economic system in which the government owns the basic means of production, determines the use of resources, distributes the products and wages, and provides social services such as education, healthcare, and welfare
Socialism developed in the early 1800s after the Industrial Revolution began
Industrialization resulted in modern economics that were more productive, but also created a great deal of suffering
Early stages of industrial revolution workers lived in terrible poverty and worked 12 hours per day, six days per week
Social reformers believed with so much productive power no one should have to suffer or starve
They lived in slums and had no power to bargain with employers
Some socialists reject capitalism to direct the economy and believed that only revolution would bring about change
These people wanted the government to direct the economy to distribute goods and wealth more evenly
Still others tried to build ideal communities or communes where people were supposed to share all things equally
Others believed that change could be brought about peacefully and gradually by organizing voters and the working class
Opponents of socialism say it inhibits individual initiative
Some people argue that because socialism requires a large governmental regulation it helps create big government that can lead to dictatorship
Also claim high tax rates hinder economic growth
Democratic Socialism
Socialists who are committed to democracy in political sphere but want better distribution of economic goods and wealth are called democratic socialists
Under this system, citizens have basic democratic right like freedom of speech, free elections but in economic sphere government owns key large industries and makes economic decision for everyone's benefits
Denmark, Norway, and Sweden are often times seen as practicing democratic socialism
In decades after WWII, democratic socialism kept a sharp focus on retaining steel mills, shipyards, railroads and airlines
Government also offered extensive welfare benefits to citizens such as health and medical care and old age pensions
Communism
Karl Marx was a German philosopher, writer, and reformer, and lived from 1818 to 1883
He saw first hand both early industrialization and political rebellions, and concluded the capitalist system would collapse
Marx saw that the industrial revolution had brought about dramatic economic change
He first published his ideas in 1848 in a pamphlet called the Communist Manifesto
Other important class in industrial society was the bourgeoisie
Workers were concentrated in factories and no longer owned their own tools, Marx referred to this group as the proletariat
For Marx this term did not mean middle class, but middle class as owners of industrial capital-the means necessary to produce industrial goods, such as factories, land, water rights, or other necessary resources
Capitalists were the ruling class because they had so much power over resources
Meanwhile workers were paid a low hourly wage, and did not receive the full value of their labor because owners pocketed the profits and paid them a subsistence wage
Class Struggles
In capitalists system Marx said wages would never rise above subsistence level just barely enough to survive
Marx interpreted all human history as a struggle between workers and the owners of the means of production
In Communist Manifesto Marx claimed there had always been a struggle between lord and master, feudal servant and feudal lord but that in the end this struggle brought progress
Marx predicted this would happen again only this time a struggle between the bourgeois owners of capital and workers
For example bourgeois merchants had opposed the interests of old feudal aristocrats in process these bourgeois merchants created industrial wealth
Overtime industries would consolidate so that a small number of capitalists would own everything
Capitalists would rob workers of more and more of the fruits of their labor
Finally the workers would overthrow the bourgeois capitalists and the goal of their revolution was socialism, or government ownership of means of production and distribution
Karl Marx called his idea “scientific socialism” and though it was scientific fact that communism would develop
What would a future communist society be like?
Marx predicted that there would be only one class, the working class and all property would be held in common and finally there would be no need for government
Communism and Command Economies
In communist nations, government planners decide how much to produce, what to produce and how to distribute goods and services produced
In Communist nations the state owns the land, natural resources, industry, banks and transportation facilities
Under this system its called a command economy because decisions are made at the upper levels of government and handed down to managers
Today only a handful of communist nations exists mostly in Asia
State controls mass communications including newspapers, magazines, television, radio, internet and movie industry
Like capitalist states, communist states vary in how much of the economy is state controlled
In People Republic of China, established 1949, the government had tight control of the economy for decades
It specified for example how many new housing units would be produced over next five years, where they would be built, who could live in them, and how much to rent them for
Chinese government had used five year plans to set precise goals for every facet of production in the nation