Evaluating Economic Evaluating Economic PerformancePerformance

and Capitalismand Capitalism

Chapter 2Chapter 2

Economic and Social GoalsEconomic and Social Goals

Every society has ideals and Every society has ideals and goals for what they want in their goals for what they want in their systemsystem

In the U.S., the following are our In the U.S., the following are our economic goalseconomic goals

Economic and Social GoalsEconomic and Social Goals

Economic freedomEconomic freedom Economic efficiencyEconomic efficiency Economic equityEconomic equity Economic SecurityEconomic Security Economic StabilityEconomic Stability Economic GrowthEconomic Growth

CapitalismCapitalism Our economy, and most market Our economy, and most market

economies, is based on capitalism.economies, is based on capitalism.

Capitalism is a system where private Capitalism is a system where private citizens (many of whom are citizens (many of whom are entrepreneurs) own the factors of entrepreneurs) own the factors of production.production.

Free enterprise is another term used Free enterprise is another term used to describe the U.S. economic to describe the U.S. economic system.system.

CapitalismCapitalism

In a free enterprise system, In a free enterprise system, competition is allowed to flourish competition is allowed to flourish with minimum government with minimum government influence.influence.

6 Characteristics of a Free 6 Characteristics of a Free Enterprise SystemEnterprise System

1.1. Freedom of ChoiceFreedom of Choice

2.2. Freedom of EnterpriseFreedom of Enterprise

3.3. Private property rightsPrivate property rights

4.4. Profit IncentiveProfit Incentive

5.5. CompetitionCompetition

6.6. Limited Role of Government Limited Role of Government (Adam Smith)(Adam Smith)

The Role of GovernmentThe Role of Government Protector—enforces lawsProtector—enforces laws

Provider and Consumer—provide Provider and Consumer—provide public services (such as parks, roads, public services (such as parks, roads, etc) and consumes factors of etc) and consumes factors of production to produce these servicesproduction to produce these services

Regulator—preserves competition in Regulator—preserves competition in the marketplace (no monopolies)the marketplace (no monopolies)

Promotes national goalsPromotes national goals