Download - COMPARATIVE ECONOMIC SYSTEMS
COMPARATIVE COMPARATIVE ECONOMICECONOMICSYSTEMSSYSTEMS
ECONOMICS IN WORLD HISTORY
WHAT DOES THIS MEAN?WHAT DOES THIS MEAN?
Student needs to know the definitions of:
1. Traditional Economy2. Market Economy3. Command Economy4. Mixed Economy
WHAT YOU NEED TO DO?WHAT YOU NEED TO DO?
Compare the economies ofhistorical societies by
focusing on their economicsectors.
ECONOMIC DEFINITIONECONOMIC DEFINITION
Economics is a Greek wordmeaning “management of the
household.” In the ancient world,this was considered women’s
work and the word is feminine inGreek. But the world over, women
made the cloth and silk traded.
BASIC ECONOMICSBASIC ECONOMICS
Economics is the study of scarcityand how societies make economic
decisions. In life, wants are unlimitedand resources are limited.
The result is scarcity.
BASIC ECONOMICSBASIC ECONOMICS
All societies make four basic economic decisions.1. What to produce?
2. For whom to produce?3. How much to produce?
4. How to distribute the produce?
ECONOMIC JOKEECONOMIC JOKE
What is the economic “Golden Rule”?
Answer:“He who has the ‘gold’
makes the rules!
WE ARE ALL MARXISTS!WE ARE ALL MARXISTS!
Irrespective of his role as itsfounding father, Marx was thefirst philosopher or economist
to see all societal structures in aneconomic perspective. He felt youcould not understand a system
without understanding who ownedthe means (factors) of production.
CAPITALIST ECONOMISTSCAPITALIST ECONOMISTS
Adam Smith was the foundingfather of capitalism or free marketeconomics. John Maynard Keynes
was the founder of fiscaleconomics. The difference between
the two was the role andinfluence of the state in economics.
FACTORS OF PRODUCTIONFACTORS OF PRODUCTION
All Societies use the four factors ofproduction to meet their needs.
1. Land 2. Labor3. Capital
4. Entrepreneurship
LANDLAND
Land represents the physicalnatural resources that the land
possesses, its quality and itsquantity. Land can be the dirt,the trees, the raw minerals, thewater, or the food grown. Land
earns rent in economic terms. Allstates possess “land.”
LAND EXERCISELAND EXERCISE
In economic terms, describe the “land” of
nomadic and prehistoric peoples,the river valley civilizations,
the classical civilizations,and all major civilizations in the Post-Classical to Contemporary
Ages.
LABORLABOR
Labor represents the number ofpeople in a society who can do
the physical labor. Labor isliterally muscle power. If
society uses mostly manpower to produce its needs, this is
called labor intensive. Labor earns wages.
LABOR EXERCISELABOR EXERCISE
In the economic terms of labor,
describe “work” in each of the historic periods
and major civilizations.
CAPITALCAPITAL
Capital is not money. It representsthe tools that societies use to produce
their needs. All societies have capital as well as labor. If capital isused more extensively in a society
than is physical labor, the society is capital intensive.
Capital earns interest.
CAPITAL EXERCISECAPITAL EXERCISE
In economic terms, what isthe capital of a(n)Nomadic society?Neolithic society?Classical society?Industrial society?
Post-Industrial society?A fast-food business?
CAPITAL EXTENSIONCAPITAL EXTENSION
Why would a person ora businessman invest
in capital? How?
ENTREPRENEURSHIPENTREPRENEURSHIP
Entrepreneurship representsthe economic equivalent of brainpower and tendency to innovate.
Not all societies encourageentrepreneurship, while others
reward it. This is sometimes calledintellectual capital and earns profit!
Trade is entrpreneurial.
EXERCISEEXERCISE
Entrepreneurship involvesinnovation and invention!
Why do ancient societies notlike innovation? How do they
discourage it? How do modernsocieties reward innovation?
TRADITIONAL SYSTEMSTRADITIONAL SYSTEMS
In a traditional economic system,people make decisions based ontheir traditions and how earlier
generations made decisions. Mostoften the elderly and clans makedecisions for the good of thosewho constitute the “group.”
TRADITIONAL SYSTEMSTRADITIONAL SYSTEMS
In a traditional economic system,land is the major input. What you
do not have, you do not have.Economies are subsistence, work islabor intensive - more work meansmore produce. Capital is simple oranimal in nature and entrepreneurs
are considered suspect.
TRADITIONAL SOCIETIESTRADITIONAL SOCIETIES
What historical societies are considered traditional?What aspects of modern
society or states areconsidered traditional?
When economic systems breakdown, why do they become
traditional?
COMMAND ECONOMYCOMMAND ECONOMY
In a command economy, decisionsare made largely by an authoritysuch as an aristocrat or a centralgovernment planning authority. It can be exercised in democratic
or authoritarian societies. Quotas and restrictions
are common.
COMMAND ECONOMYCOMMAND ECONOMY
What ancient economies werelargely command? Why might
a hydraulic society (one dependanton control of water and irrigation)
be considered command? What20th century societies are or were
command economies?
COMMAND ECONOMYCOMMAND ECONOMY
Why does a war-time economyhave to be command? Why would
an economic crisis warrant acommand economy? Can you name
some historical examples? Wasmercantilism a command economy?
MARKET ECONOMIESMARKET ECONOMIES
Market economies are sometimescalled free markets. They representdecentralized decision making thatis reflected in the unencumbered
interplay of supply, demand, and price for goods and services
No one is powerful enough to control the market.
MARKET ECONOMIESMARKET ECONOMIES
Market economies can only existwhere goods are plentiful, have many close substitutes, and norestrictions on exchange. This
is free trade. Additionally,consumers have many choices
and no one choiceis better than another.
MARKET ECONOMIESMARKET ECONOMIES
Several of the key ideologicalcomponents of market economies
are the rights to own privateproperty (capital) and to dispose
of it in any way you want tomake profits without restrictions.
“Land” is sold to the highest bidder and labor seeks a fair wage.
MARKET ECONOMIESMARKET ECONOMIES
Based on the previous definition,do market economies exist? If so, under what conditions?
Would you consider the United States a market economy?
Why or why not?
MARKET ECONOMIESMARKET ECONOMIES
What is a black market?Why might one be considered
a “free market” economy?What might the Drug Trade
be considered a “market”economy?
MIXED SYSTEMSMIXED SYSTEMS
Ok, but allall economic systems throughout history
have been or aremixed to some lesser
or greater degree.
MIXED EXERCISEMIXED EXERCISE
Can you identify which aspectsOf any famous historical
economy aretraditional, command, and
market?