Chapter 7 Section 4
New Ways of Thinking
Mr. Bellisario
Woodridge High School
October 10 & 11, 2013
Lesson Objectives
• Describe laissez-faire economics and the
beliefs of those who supported it.
• Summarize the theories of socialism.
• Explain Karl Marx views of the working class
and the response to Marxism.
Laissez Faire Economics
Physiocrats
• Believed government should not interfere in
the free operation of economy
• Early 1800’s middle class business leaders
embraced “hands-off”
Laissez Faire Economics
Adam Smith
• Wrote, Wealth of Nations
(1776)
• Believed in a free-market
economy, no government
intervention
• Unregulated exchange of
goods & services – would
come to help everyone, not
just the rich
• Produce more goods at lower
prices, making them
affordable to everyone
• Encourage capitalists to
reinvest profits in new
business
Laissez Faire Economics
Thomas Malthus
• Population would grow
more than food supply
• Checks on population
– War
– Disease
– Famine
• Urged families to have
fewer children
Malthus’ Basic Theory
Laissez Faire Economics
David Ricardo
• “iron law of wages”
• When wages are high,
families have more kids
– This meant a greater
labor force
– Led to lower wages &
higher unemployment
Both Malthus & Ricardo felt…
• Individuals should
improve their lives
through:
– Thrift
– Hard work
– Limiting family size
Utilitarians
• Goals - of society should be the greatest
happiness for greatest number – Jeremy
Bentham & John Stuart Mills
Utilitarians
• Actions/laws are right if they bring happiness, wrong if
they bring pain
• Wanted government to help improve lives of working
class
• Factory workers
– Had right to increase their own happiness
– Government should step in when owners’ happiness hurt
workers
• Responsible for reforms from child labor to public
health
– But did not change society greatly
– Goal was to end poverty & inequality
Socialism
• People, as a whole, would own means of
production (factories, farms, natural
resources, transportation, etc., needed to
produce goods)
• Condemned (hated) capitalism (individuals
own means of production)
Utopians
• Early socialists
– Built self-sufficient communities
– Everything owned in common
– All work shared
Socialism
Robert Owen
• Selected New Lanark,
Scotland as model
village & factory, based
on cooperation
–
–
–
–
–
Limited child labor
Encouraged labor unions
Homes for workers
Schools for children
Still able to make a profit
Communism
• Introduced by Karl Marx & Frederick Engels
• Communism – radical form of socialism
• A German socialist-philosopher & German
socialist whose father owned textile factory in
England
– Communist Believe
• A very few wealthy individuals controlled a majority of
poor
• Felt Utopians were unrealistic
Karl Marx
• Wrote Communist Manifesto
(1848)
• Saw class struggle between
bourgeoisie (middle class) and
proletariat (working class) as
unavoidable
• Marxism:
– “Haves” (capitalists, bourgeoisie)
always owned means of production
& controlled society & wealth
– “Have nots” (poor, working class,
proletariat) would take control of
means of production & set up a
classless communist society by
overthrowing the “haves”