Capitalism: Ideology, Institutions, Assessment

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Capitalism Ideology, Institutions, Assessment

• Study Materials Found in McConnell and
  Thinkwells Chapter 9

2
Capitalist Ideology

• Limited Role for Government
• Self-Interest
• Free Trade
• Competition

3
Self-Interest

• Very misunderstood idea
• Adam Smith was a gentle professor and believe
  were inherently cooperative.
• Greed, theft, criminality have given
  self-interest a bad name. My home country comes
  to mind, unfortunately.
• Key ingredient is the notion that people can be
  trusted to pursue their self-interest better than
  committees, governments

4
Limited Role for Government

• National Defense
• Police, Justice System
• Legal Framework to Economic Activity
• Newer Spheres

5
Competition Tussle Bet. Equal-sized Parties
Brings Out Good Competition

• Safeguards
• Limits
• Microsoft Monopoly Case
• What do you think happen here?
• What, if anything, went wrong?
• What should we do now?

ENRON DEBACLE
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Competition Gone Wrong? Enron Inc., Houston, Texas

• Divide yourselves into groups to examine these
  questions. Come back and report to class.

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Capitalist Institutions

• Markets
• Private Property
• Private Enterprise
• Rule of Law

8
Capitalist Models

• Circular Flow Model
• Pure Competition Model

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Circular Flow Model
RESOURCE MARKET
RESOURCES
INPUTS
BUSINESSES
HOUSEHOLDS
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Circular Flow Model
COSTS
INCOMES
RESOURCE MARKET
RESOURCES
INPUTS
BUSINESSES
HOUSEHOLDS
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Circular Flow Model
COSTS
INCOMES
RESOURCE MARKET
RESOURCES
INPUTS
BUSINESSES
HOUSEHOLDS
GOODS SERVICES
GOODS SERVICES
PRODUCT MARKET
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Circular Flow Model
COSTS
INCOMES
RESOURCE MARKET
RESOURCES
INPUTS
BUSINESSES
HOUSEHOLDS
GOODS SERVICES
GOODS SERVICES
PRODUCT MARKET
CONSUMPTION
REVENUE
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Capitalism Reconsidered

• Criticisms of Capitalism
• Greed a problem?
• Sexism, Racism, Homophobia?
• See treatment of gays under Cuban Communism in
  BEFORE NIGTH FALLS (VIDEO)
• Poverty up under capitalism?

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Free Trade Reconsidered

• Criticisms of Free Trade
• Big countries exploit smaller ones?
• Small countries invaded by ruthless
  multinational?
• Take a look at anti-WTO sites for support to
  these charges
• Conversely, look up pro-free trade sites
• Poverty up under capitalism?

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Summary

• Choice of economic systems matters
• None are pure but incorporate from others
• Countries where most people are happy enough w.
  results are few!!! Dr. Vs longtime observation.