Capitalism
Adam Smith was a Scottish economist and philosopher who wrote The Wealth of Nations in
1776, which described the basic principles of economics for the first time. Adam Smith was known
as the father of capitalism.
Smith’s economic writings were very influential to the market economy or capitalism. In his
writings he developed the ideas of laissez-faire government and the invisible hand.
 Laissez-Faire- meaning to let alone; government should not interfere
 Invisible hand- guides a nation’s resources to their most productive use, through selfinterest and competition
o The market regulates itself
Keynesian Economics
A form of economics, started by John Maynard Keynes, which encourages government action to
increase and decrease demand and output. This economy believes that both the government and
private citizens control the factors of production.
Keynes believed that 2 things needed to happen to end the Great Depression
1. Consumers need to spend more money
a. Keynes thought that the spender should be the govt. According to his theory, the
govt. should buy goods and services. This would encourage production and
increase employment.
2. Businesses need to increase output
As a result of this theory, people go back to work and then spend the money they make on goods
and services – this increases production.
Marxism
Karl Marx wrote the Communist Manifesto which said that there was a class struggle between the
two classes (proletariat and bourgeois).
 19th Century social classes
o Proletariat – those that own very little and therefore must sell labor to the
capitalists
o Bourgeois (capitalists) – the person that owns the factories and buys labor
 The conflict between these two classes will eventually lead to revolution by the
working class (proletariat).
 This document lays out the foundations of communism.
 Government should take action to avoid this class struggle.
Since the collapse of the Soviet Union, few countries would describe themselves as having a
Marxist government. Political parties throughout the world still maintain Marxist ideologies.
Despite Marx’s predictions, capitalism is still thriving! We still see the existence of a working class
and entrepreneurs.
Important Economists
Capitalism
1. Who is known as the Father of Capitalism?
2. What type of economy is capitalism included in?
3. What are the two principles described by Smith? Define them.
Keynesian Economics
1. Who created Keynesian economics?
2. What type of economy is Keynesian economics included in?
3. Why does Keynes think the government should spend more?
Marxism
1. Who created the Marxist ideology?
2. What type of economy is Marxism?
Important Economists
Capitalism
1. Who is known as the Father of Capitalism?
2. What type of economy is capitalism included in?
3. What are the two principles described by Smith? Define them.
Keynesian Economics
1. Who created Keynesian economics?
2. What type of economy is Keynesian economics included in?
3. Why does Keynes think the government should spend more?
Marxism
1. Who created the Marxist ideology?
2. What type of economy is Marxism?
3. What political ideology has its foundations in this Manifesto?
3. What political ideology has its foundations in this Manifesto?
4. Who should end the class struggle?
4. Who should end the class struggle?
Important Economists
Capitalism
1. Who is known as the Father of Capitalism?
2. What type of economy is capitalism included in?
3. What are the two principles described by Smith? Define them.
Keynesian Economics
1. Who created Keynesian economics?
2. What type of economy is Keynesian economics included in?
3. Why does Keynes think the government should spend more?
Marxism
1. Who created the Marxist ideology?
2. What type of economy is Marxism?
Important Economists
Capitalism
1. Who is known as the Father of Capitalism?
2. What type of economy is capitalism included in?
3. What are the two principles described by Smith? Define them.
Keynesian Economics
1. Who created Keynesian economics?
2. What type of economy is Keynesian economics included in?
3. Why does Keynes think the government should spend more?
Marxism
1. Who created the Marxist ideology?
2. What type of economy is Marxism?
3. What political ideology has its foundations in this Manifesto?
3. What political ideology has its foundations in this Manifesto?
4. Who should end the class struggle?
4. Who should end the class struggle?