3. Characteristics of Market System Capitalism Review  View Entire Chapter 3 2/27/19

     A. Economic systems determine what to produce, how to produce, and who will receive production. 
     B. An economic system must also adapt to changing economic environments. For example, America
          must adapt to changes to September 11?
Adam Smith described the beginning of capitalism. 
         1. His book, The Wealth of Nations, was the first description of capitalism. 
         2. Published in 1776, it described capitalism as it was practiced in 18th century England.
    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 during the last few decades.
    E. Modern Capitalism has additional features
        1. Complex Market System Setting Prices
        2. Importance of Capital Goods and Technology
        3. Specialized
            a. Complexity requires company produce limit their product lines
            b. Division of Labor allows specialization by ability ad training.
   F. Creative Destruction described by 20th century sociologist/economist Joseph Schumpeter
          was an important addition to the idea of capitalism. 
        1. Change involves the creation of improved economic structures based on technology and the
            destruction of inefficient  economic structures.

        2. Capitalism allows this destruction to take place.

G. Economic Systems
      A. Pure capitalism as described by Adam Smith never existed.
      B. Recent economic systems have are Mixed Economies  (a mixture of Capitalism  and Socialism)
          1. Socialism collective ownership and management of
equally distributed economic resources.
          2. Democratic Socialism, as practiced in Western Europe, has public ownership of key industries
              such as transportation and communication 
              a. The economic systems of Europe began moving toward more capitalism in the late 1970's
              b. Margaret Thatcher, former prime minister of England, started this trend.
              c. Ronald Reagan agreed and stressed the market system during his presidency (1981-89).
          3. Communism  is the ideal of those practicing a "Marxian system." 
              a. Named after 19th century philosopher Karl Marx
              b. The public owns almost all wealth which is centrally managed, i.e., a planned economy

c. Presidential Courage explores how Ronald Reagan deplored Communism.
C. Traditional economy customs determines the economy activity of many developing countries.