1. “It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Adam Smith 1776

2. Capitalism

3. I. Founder A. Adam Smith 1. An Inquiry into the Nature and Causes of the Wealth of Nations (The Wealth of Nations)1776 * Advocates the virtues of economic freedom

4. Adam Smith and The Wealth of Nations

5. Who else wrote a document in 1776 espousing the virtues of freedom, specifically political freedom, and what was the name of that document?

6. II. Philosophy A. Economic freedom 1. Private ownership of the factors of production * Land, labor and capital

7. Today economists include entrepreneurship as a factor of production. Who are these famous entrepreneurs?

8. 2. Laissez-faire (let things alone) * No government interference in economic affairs Milton Friedman, the 1976 Nobel Prize-winning economist, advocated laissez- faire capitalism

9. 3. The market – the free exchange between buyers and sellers The “invisible hand” (self-interest and competition) regulates the market; which results in consumers getting the products they want at lower prices

10. Quick Review – Philosophy of Capitalism A.Economic freedom 1. Private ownership of the factors of production – land, labor & capital 2. Laissez-faire – no government interference in economic affairs 3. The market – the free exchange between buyers and sellers * The “invisible hand” (self-interest & competition) regulates the market

11. III. The need for govt. intervention? A. Beginning in the late 19 th and early 20 th century, government began to violate laissez-faire 1. Anti-trust legislation * Break up monopolies and promote competition

12. Teddy Roosevelt famous trust buster

13. 2. Product health & safety regulation Pure Food and Drug Act

14. 3. Child labor laws

15. 4. Laws regulating working conditions

16. 5. Labor unions The right to organize unions,collective bargaining and the right to strike

17. 6. Banking and securities regulation

18. 7. Minimum wage

19. 8. Unemployment insurance

20. 9. Pollution regulations Environmental Protection Agency

21. 10. Public infrastructure Roads, schools, libraries, dams etc.

22. 11. Government economic stabilization Monetary policy (the Federal Reserve controlling the money supply) Fiscal policy (spending and taxing policies)

23. Ben Bernanke – Chairman of the Federal Reserve Bank

24. 12. Health care Medicare and Medicaid

25. 13. Income security programs Social Security

26. Income security programs (continued) Welfare and Food Stamps

27. Income security programs (continued) Farm subsidies

28. Income security programs (continued) Government pensions

29. Quick Review – Government Intervention? 1. Anti- trust legislation 2. Product health and safety regulation 3. Child labor laws 4. Laws regulating working conditions 5. Labor unions –right to organize and strike 6. Banking and securities regulation 7. Minimum wage 8. Unemployment insurance

30. Quick Review – Govt. Intervention? (cont.) 9. Pollution regulations 10. Public infrastructure 11.Government economic stabilization – monetary & fiscal policy 12. Health care 13. Income security programs