Three Decisions of Economic Systems

“If an elective republic is to endure for any great length of time,
every elector must have sufficient information…to direct wisely
the legislature, the ambassadors, and the executive of the
nation… It is the duty of government to see that the means of
information be diffused to every citizen.”
-Thaddeus Stevens, Apr. 1835
What might this quote be talking about?
Economics Theories
The Role of Economics in Government
Economics Systems
Three Decisions of Economic Systems
1. What and how much should be produced?
2. How goods and services should be produced?
3. Who gets the goods and services that are produced?
Economics Systems
History of Capitalism
 Capitalism developed from economic and political changes in
early modern Europe
 Market System
People could work for Economic Gain
2. Wealth should be used aggressively (?)
Free Market
Buyers and sellers were free to make unlimited economic
decisions in the marketplace
History Cont..
 The Wealth of Nations
 Written by Adam Smith
 Provided a philosophy for capitalism
 Concept of Laissez-faire
 “to let alone”
 Gov. has hands off policy towards economy.
 Market - determines price and goods produced
 Gov. Influence
 Mixed Market Economy – free enterprise combined and supported
by government decisions in the market place.
 How does the free enterprise system contribute to the idea of
individual liberty?
Five Main Characteristics
1. Private ownership and
control of property and
2. Free Enterprise
3. Competition among
4. Freedom of choice
5. Possibility of Profits
Communism Hist.
The Communist Manifesto (pamphlet)
 Written by Karl Marx
 Argued that population was divided
 Bourgeoisie-Capitalists and owners of
 Proletariat – workers who produce the goods
 Class Struggle between workers and
Communism Beginning
“In short, Communists everywhere support every revolutionary
movement against the existing social and political order of things…
Let the ruling class tremble at the Communist Revolution. The
proletarians have nothing to lose but their chains. Working mean of
all countries, Unite!” -Karl Marx, 1848
 According to Marx, How must communism come about?
 Why might communism begin in this way?
Goal of Communism
 Full Communism
 One class would
 Property would be
 No need for
 Is Full Communism
Communist Government
 Command Economy
 Decisions are made at the upper levels of government.
 State owns land, natural resources, industry, banks, and
 State controls all mass communication
 T.V., newspapers, radio etc…
 Communism fails to provide adequate standards of living
 Ends in Government Change or Revolt by the people. (China)
Socialism Hist.
 Modern Socialism
 Develops in 19th century
Industrialization causes problems
 Low paid workers
 Slums in cities
 Democratic Socialism
Peaceful change
Gov. owns mean of production and makes most economic decisions
Free Elections
Tanzia, Denmark, Norway and Sweden
Three Main Goals
1. Public Ownership of most land, factories, and other means
of production.
2. Equal Distribution of wealth and economic opportunity
amongst population.
3. Society’s control, through its gov., of all major decisions
about production.