Chapter 3 Characteristics of Market
Characteristics of Capitalism
|I. Basic Characteristics of Capitalism (market economy)|
|A. Economic systems determine what to produce, how to
produce, and who will receive production.
B. An economic system must also have the ability to adapt
to changing economic environments. For example, How
will America's economic system adapt to changes caused
by September 11?
C. Adam Smith described the beginning of market based Capitalism.
1. His 1776 book The Wealth of Nations first described
of capitalism as practiced in 18th century England.
2. For more visit econlib.org/library/Enc/bios/Smith.html
D. Basic characteristics described by Adam Smith
1. Private property-the right to own resources and bequeath property
2. Freedom of enterprise-own a business
3. Freedom of economic choice-work/not work, spend/not spend ...
4. Role of self-interest
a. People are by nature economic creatures
b. Self-interest is a fundamental characteristic of people
5. Competitive market system
a. Many buyers and sellers
b. Market participants, buyers and sellers,
have little control over price
c. Competition performs the organizing and
controlling functions for a market economy
6. Limited government ("Laissez-faire ")
a. Government should let markets be with a hands-off philosophy
b. Acceptable government involvement has become an important
political question in the United States from the revolution.
c. Francois Quesnay popularized term laissez faire.
7. Characteristics of capitalism lead to Creative Destruction
a. First described by 20th century sociologist and economist
Joseph Schumpeter, it was an important new idea of capitalism.
b. Change involves the creation of technology, improved economic
structures and the destruction of inefficient economic structures.
c. Capitalism allows this destruction to take place.
d. The fight between labor and management has also brought much
e. Let Us Now Praise Private Equity explores the application of creative
destruction to the poor job creation since the great recession.
f. Carnival of Creative Destruction: a futurist predicts change
g. Rust Belt Almanac Mid-West decline and Creative Destruction
h. Editor's comment concerning free trade
Free trade increases supply which forces price down
resulting in some combination of lower profit or lower
cost. Owners and managers are good at maintaining
profit and will try to lower the cost of materials, labor
or overhead. Workers often bear brunt of this process.
8. The Success and Price of Capitalism Video 61 min
|II. Modern Capitalism has many additional features|
|A. Complex Market System Setting Prices
B. Importance of Capital Goods and Technology
1) Complexity limits product lines.
2) Division of Labor allows specialization by ability and training.
D. Unique Descriptions of Modern Capitalism
1. Corporate Capitalism: a capitalist marketplace
characterized by the dominance of hierarchical,
2. Crony Capitalism has been around from the beginning.
a. New name is Corporate Welfare
b. How crony capitalism corrupts the free market 30 min
c. Hunter Lewis on crony-capitalism 30 min video
d. Geithner and Summers accused of being Crony Capitalist
3. Money Manager Capitalism: money managers dominate
savings and investing and markets impacting economy's
4. State Capitalism: economy driven by the state, less
reliance on markets, practiced in China. Editors Question:
Will China's system morph into Democratic Socialism?
Sources of Economic
"rent-seeking is expending resources on political activity to increase one's share of existing wealth without creating wealth"
Democratic Capitalism vs. Capitalistic
is about cost effectiveness of democracy.
6. Patrimonial Capitalism is living off of inherited wealth.
7. Capital in the Twenty-First Century was a very popular
2014 book by Thomas Pikett.
a. Capitalism vs. Democracy editorial 1/28/14
b. Capitalism in the Twenty-First Century 3/25/14
c. Taking on Adam Smith and Karl Marx NYT 4/19/14
d. Capitalism is Not to Blame for Middle-Class Plight
8. Capitalism is a concise overview from reference.com
9. Calvin and Hobbes Explain Modern Capitalism
Criticism of Modern
A. Crises Capitalism is a concise video contains ideas about
capitalism resulting from The Great Recession of 2008-2009
B. Current Political Economy Questions stem from the criticism.
C. Why is Chinese Capitalism Better than American Capitalism?
D. Why Intellectuals Hate Capitalism by Robert Nozick
E. American Politics Are we a Democracy? A Republic? A Polyarchy?
Noam Chomsky breaks down American Politics today and
American Politics that our founders envisioned.
F. Is Capitalism Moral? A Commonwealth Club Podcast Debate
G. Hoodwinked An Economic Hit Man Reveals Why the
World Financial Markets Imploded--and What We Need
to Do to Remake Them, by John Perkins
H. Coercive power of capitalism
I. Capitalism and Inequality (Jerry Z. Miller, Foreign Affairs)
Without social safety nets capitalism is doomed through
social disorder. Editor's Note: I've seen a lot of verbiage
blaming Capitalism for the inequality in the United States.
Inequality is a political question. It is the responsibility of
voters through politicians to equitably distribute production
without substantially limiting the productive capabilities of
capitalism which has coped well with the Balance Sheet
Recession known as The Great Recession. See
People Not Voting Their Pocketbook is Literally Killing the Poor
J. How Will Capitalism End 6/14
K. Has Capitalism Reached a Turning Point concerning reform
1. The Crisis of Capitalism, The Critique from the right
2. Unfettered Capitalism | Chris Hedges & Michael Moore 8:44
3. Capitalism in Crisis 1:40 is well-done.
M. Readings and Videos
1. The Fall of Rome reviews the market system of the Roman
empire and how the author believes government failures caused
2. Blackstone's Byron Wien, successful capitalist
states lessons of his first 80 years
Blackstone's Byron Wien, successful capitalist
states lessons of his first 80 years
3. Revisiting Old Argument About Impact Capitalism Economist 4//14
4. Economic system has many concise definitions.
5. Business Isn't Capitalism 5/3/14
6. Economic Report of the President 2014
7. The Great Recession Using Quick Notes
8. Capitalism.org. has a somewhat conservative view of capitalism.
9. The Shared Capitalism Institute a somewhat liberal view
10. Great Economists: Classical Economics and its Forerunners free course.
11. Alexis de Tocqueville wrote about capitalism and
democracy in 19th century America. See
Democracy in America-Vol 1
12. Sequester Capitalism, Democracy and Money Theories
13. American Misconceptions about Capitalism 6/13
14. Current U.S. Political Economy Controversies
provides data to assist analysis.
15. Videos and Audios
a. The Successes and Price of Capitalism 1 hour Video
b. The End of Capitalism
c. BBC audio on the History of Capitalism
d. The Private Sector against corruption 30 min
e. Great Recession from a Classical-Keynesian View
from Roger Farmer Pepperdine School of Public Policy
1. Who are the Academic Sc 9.11
2. Refining Classical Economics 9.29
3. Effect of the Great Depression 9.14
4. 1970's oil shock shocks the world of economics 8.52
5. How bad is the economy and where is it going 7.41
16. Center on Capitalism Columbia University is a great source
Are questions raised here
Some Criticize Dramatically
Some Question his motives as
Ida Tarbell an investigative journalist called a Muckrakers known. She exposed Standard Oil Trust. Working for McClure Magazine and other monthly magazines they help educated the public from 1890 to 1929 in what is known as the Progressive Era.
|IV. How Markets Work: The Circular Flow|
Free Internet Libraries
Fabian Economics The Fabian Society is a
|Degrees of Socialism
|Country Economic Policies
1. Colonialism is where one nation assumes political or economic control over another. The practice has occurred throughout history and has been compatible with all economic and political systems.
See Greece and the Endgame of the Neocolonial Model of Exploitation
2. Mercantilism is economic nationalism to build a wealthy powerful state. It is system of political economy
designed to enrich the country by restraining imports and encouraging exports. Some feel Neomercantilism is practices by Japan,
China and Germany.
3. Current Political Economy Controversies create difficult policy questions.
Ronald Reagan and Margaret Thatcher at the White House, 16 November 1988
|Editors Note: Most unbiased observers would feel uncomfortable calling Democratic Socialism radical. Followed by many of the great countries of Europe after WWII, it did very well but some would feel it drifted toward communism. Prime Minister Margaret Thatcher pushed Great Britan toward capitalism by selling many large state owned industries and instituted business deregulation. Ronald Reagan followed suit in the U.S. though he concentrated on deregulation. Some 30 years later Thatcher's Great Britan has fared better than more socialistic continental European as politicians have allowed government spending and borrowing to get out of control. Conservatives in America feel they must stop U.S. politicians from doing the same thing.|
VI. Political Systems
A. The Basics Video 3:28
B. Republics exist when governmental power resides in
the a constitutionally determined government which
is ruled by elected leaders run according to law (from
Latin: res publica) resulting in individual and minority
protected from the majority.
1. There are many application of Republican concept. In the
U.S. property rights are strongly associated with a Republic.
2. To John Adams it was "a government, in which all men,
rich and poor, magistrates and subjects, officers and
people, masters and servants, the first citizen and the
last, are equally subject to the laws."
3. Law may be determined with a direct democracy also
known as pure democracy in which voters vote on
policy initiatives directly or an indirect democracy or
representative democracy as in the U.S.
where citizens elect officials to make on their behalf.
a. The 1911 17th Amendment moved the election of
U.S. Senators from the house of Representatives to
voters which was a movement toward direct
democracy. The 1919 19th Amendment and 1971
26th Amendment expanded the electorate thus moving
the U.S. closer to being a Republic as the
electorate for a larger group of "people."
b. Removal of the Electoral College from the presidential
election process favored by some would move the
process closer to the people which is Republicanism.
It would be a move toward direct democracy because
of majority rules. This move would make many
founding fathers unhappy because they feared
anarchy especially after the French Revolution.
c. The U.S. is basically a Republic though process
often allows a democratic majority to rule.
1. The Constitution protects the minority which is a
Republican principle. The Supreme Court follows
the democratic majority rule principle.
2. People make up the electorate which has changed
continually both legally and in practice making our
Republic somewhat dynamic. Editors Note: Voter
rules are again a hot topic in 2015.
3. In United States v. Cruikshank (1875) the court ruled
that the "equal citizens" were inherent to the idea of a
C. Democracy exists when governmental power resides
in the a constitutionally determined electorate with
equal say in determining the majority. It makes political
decisions such that the majority’s power is absolute
Thoughts of our Founding Fathers
Democracy varied dramatically. Federalist
George Cabot of
Massachusetts feared ..."the terrible evils of
democracy," and felt Jefferson was unstoppable,..."
From p368 of
The Art of Power, 2012, a biography by Jon Meacham as
summarized by Walter Antoniotti
Democracy and a Republics are often used interchangeably. Source
Current Political Economy Questions may substantiate that democracy could not control government spending.
Universal male suffrage began in 1884 France and was an important milestone in the history of democracy.
|VII. Politics in the U.S. Democratic RepublicPlease|
U.S Voting Rights Timeline
B. 20th Century U.S. Political Economy
C. Money in U.S. Politics Using 40 charts.
D Presidential Politics is a 5-page concise
summary of Presidential Elections.
E. Presidential Courage depicts great
presidents serving democracy.
F. The End Game for Democracy Bill
Moyer's 3 minute video on all aspects
of public and private life.
G. A Republic No More Video 1:03
explores of U.S. Democracy and
the concept of a Republic.
H. Political Systems Sundry Materials
1. Political Systems are about control.
2. Tenth Amendment (Amendment X)
to the United States Constitution,
which is part of the Bill of Rights
was ratified on December 15, 1791.
a. The Tenth Amendment states the
Constitution's principle of
federalism by providing that powers
not granted to the federal government
nor prohibited to the States by the
Constitution are reserved to the
States or the people.
b. This requires judicial interpretation.
3. The Civil War was a power struggle over
federal power and the 2000 federal
election is a good example of the
struggle over power.
4. Libertarianism wants to limit power.
5. Rights vs. Freedoms
6. We the Intelligent People of the U. S.
provides insight into American
democracy. by Frank Li, Ph.D.4/23/14
7. Book Summaries Internet Library's
reviews Hoodwinked, a international
corporations are altering capitalism as
8. Origins of Democracy and the Citizenship
of Athens c. 440 BC – 430 BC is about
the beginning of government.
9. Misconceptions About Democracy
10. Eric X. Li: A tale of two political systems
VIII. Conclusion: Four Horsemen 1:39 video is a collection of today's greatest sociological, political and economic voices that analyze and put into historical perspective the decisions and results of our economic and political systems.
Editor's Note: The democracy we enjoy today has been built over 250 years. Part 2 of Turning Points in American History Explores the Journey.
7. A Nerve With The 1773
Boston Tea Party
8. A Hesitant Reluctant 1776
Nation Seeks Freedom
9. The French Save the Day
10. 1786 Shays' Tax
Rebellion Leads to Constitution
12. First Peaceful 1800
Transfer of a Power by a
13. Marshal Creates a Third
"We the People..."
Who Are they?
Who Are they?
23. Who Protects Unalienable
1866 Rights of
25. The 1870's Takes Away
33. Government's 1930's
Safety Net Deficits Like
42. Civil Rights Goes Fast
Track in 1963
|Market System Capitalism and Political Economy Videos|
Quiz on Economic Systems
A. Provided with answers from steponicseconom cs
B. Exam Strategies + has comprehensive testing advise.
G. Course project/discussion
Editor's Note: To solve the problem of not enough income for the middle classes in the 1980's capitalism changed the name of Home Improvement Loans to Home Equity Loans. People were encouraged to immediately spend what had been a retirement nest egg. There is nothing wrong with this as long as people realize that they may be delaying retirement.
Is This Divergence an Economic or Political Issue?
Political Economy Controversies
For Those Wanting to Improve Education
Educating the Class of 2030 for Employment and Creativity
Here is a visual version of the well-known cow based analogy of capitalism.
US Produces Most Per Capita
Voters Hire Politicians That Overspend and
Promise More in the Future at all levels of Government
Cheap Imports Allow Even More Consumption.
We Borrow on Home Equity for Current Consumption.
Yet Many Seem Dissatisfied?
|Market System Capitalism and Political Economy Videos|