Toni Oniel
5/2/14
Macro-Economics
Mr. McCoy
Economic Systems
In the world today, there are several different economic systems. Usually, the majority of countries will implement either a Capitalistic, Socialistic, Communistic, Traditional, or Mixed economy. Over the course of history, economists have studied several nations and the way they function. Certain systems are newer than others, and some are more successful than others.
Capitalism, for example, appears to be one of the most successful economic systems. Capitalism is heavily based on who decides the answers to three questions: What is produced? How is it produced? Who receives the product? For Capitalism, the answers are the people. The people decide what is produced, how it is produced as well as who receives the product. It is a free-market economy that focuses on private ownership rights, free trade, and a non-government regulated economy. This system dates back as early as the Middle Ages when Europeans practiced merchant capitalism. Now, Capitalism is the dominant economic system in the world’s established nations. The United States, Germany, India, and Japan are all examples of Capitalistic countries. The U.S., Japan, and Germany are all in the top four biggest economies with the world’s largest GDPs. This demonstrates Capitalism’s great success. We owe a great deal of its success to Adam Smith. Smith was one of the biggest founders of Capitalism. Smith’s ideas and theories can be found in his book, An Inquiry into the Nature and Causes of the Wealth of Nations. In his book, Smith emphasizes that a country’s wealth is based on its productive ability. He also says that the government should have a very little impact on the economy. He believed that economies always h...
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...imitive will most definitely develop slower than those that implement current technology. Other examples of traditional economies would be clans, tribes, or nomadic groups. This is perhaps the oldest economic system since this could be applied before real civilizations came into existence.
The world has seen a number of economic systems, and some will last longer than others. Either way, there is no perfect economic system because economics are constantly changing and morphing to meet their nations’ needs. Economists will continue to study these systems, as well as others, for years to come in hopes of discovering a new system that works even just a little bit better than what they currently use. As for now, there are no true Capitalist countries, true Socialistic, true Communistic or even true traditional economies. All nations seem to be approaching a compromise.
i. The economy is said to be ‘booming’ when demands for certain products and services rise. When demand rises, the prices will also increase. Increase in price can boost up the company’s profit. This enables companies to hire more workers thus increasing the numbers of employments. The increase in company’s profit also allows employers to raise the employees’ wages. When companies have more workers, they would be able to produce more products. Overtime, these outputs will then be sold to the people with jobs at a higher price because of the scarce amount of resources available.
Capitalism, by definition is known as “a way of organizing an economy so hat the things that are used to make and transport products are owned by individual people and companies rather than by the government”(Marxism). To some, this is the correct way of handling the economic situation in one’s country. But to others, such as Karl Marx and Adam Smith, there are other systems that would be more adequate. Is capitalism really the best way to go? What are the other options that could be better than capitalism? We must see which would be the best for society. If one were to negatively affect it, then it is not an option that should be taken. So, we must see the pros and cons for capitalism and how it can affect the economy and our society.
The emergence of capitalism in Western Europe was considered as a majority change in human history. As prior to the emergence of capitalism conditions are mainly agriculture and there was no sustained monotonic income per capita. Also prior to the emergence of capitalism there was a feudal system of organising the economy emerged in the 15th century of medieval Europe.
Karl Marx believed that the only way to understand present day’s economic system, you need to study history and social class. Capitalism emerged from pre-capitalist societies like slave economies, feudalism and mercantilism. These societies are all connected to each other through development, decay and replacement. These societies are never static and always evolving. Rome’s slave economy transformed into feudalism and then mercantilism developed from feudalism. Over time, mercantilism leads to what we call modern day capitalism.
Classical economists such as, Jean Baptiste Say, Adam Smith, David Ricardo, and Thomas Robert Malthus, had a different view about the role of the government in a capitalistic society. The classical economists believed in a laissez-faire economy. They believed that the government should keep their hands off the nation’s economy. They felt that the market will be able to keep itself stable, without the intervention of the government. Jean Baptiste Say believed that supply would create its own demand. The classical economists had an assumption that the aggregate production of goods and services in the economy generate enough income to purchase all output. They also had the assumption that savings by the household sector matches investment expenditures on capital goods by the business sector.
Throughout history the world has experienced several types of socio-economies, from Mussolini’s fascism to Mao’s communism. All of those economies have its weaknesses and strengths and most have countries that can validate its effectiveness. However, to decide which economy is truly better for society, there has to be criteria on which to judge the economy’s effectiveness. So what is a society? In essence, it is a network of bonds we as human beings forged under the assumption, that working together we can all be happier than if we were only looking out for ourselves. With society, everyone is able to concentrate on what they do best, reap the benefits from the skills of others, and avoid the conflict that would arise otherwise. Thus, it follows that the ultimate goal of society is the happiness of everyone. And currently, there is only one economy that has staved off the test of time and reached that goal. Capitalism, with its merit system, flexible cost adjustments, and by having no other economic contenders is able to achieve a better society than any other socio-economic system can.
Capitalism can be many different things, but it is basically an economic system that is based off
Capitalism has never been dead and will be here for at least the next century. In a world where the market is filled with imperfections, it is in order for the government to interfere to restore order in the market. Increased concerns over the 2008 market collapse prompted the government’s to take charge of their responsibility and act. Capitalism is a system of government that favours individual growth with minimal government interference. The opposite of capitalism is communism, where the property owner is the state, and the main aim is social welfare enhancement. A mixed economy embraces the two and balances between the extremes. Many countries across the globe have adopted a mixed economy as it reduces the losses suffered by the countries that practice the extremes. Capitalism has been known to be responsible for growth of economies among them, the United States, Britain, and other developed countries. In this essay, we shall examine the future and nature of capitalism in the light of a mote communist future.
Smith and Marx both have diverse theories as to what would lead nations to a stable and efficient economy. Smith wrote his famous “Wealth of Nations” in 1776, which became one of his greatest works. The changes in the European economy and industrialization had an impact on Smith which is reflected in his writings. The complex formation of today’s economy throughout the world is highly influenced by Smiths take on capitalism. Despite the fact that Smith’s approach might have a more conclusive stance in the
the groundwork for what would eventually become the economic system for many countries around the world. In addition to this, the existence of capitalism spurred the values of democracy in a sense that the two ideas (capitalism and democracy) go hand in hand, both providing freedom with regards to a certain facet of life. Smith’s capitalist ideals are reflected in the way the modern economy works, and the overall dominance the system has over other systems of economics. His theories are especially prevalent today as opposed to during the 20th century, when the rise of communism threatened to overtake the capitalist system of economics.8 In sum, Adam Smith’s theories and beliefs are prevalent within society today because they essentially became the norm with regards to economics and governance around the world. This is evident in the fact that even traditionally communist countries, such as Russia and China, have taken on a capitalist approach with regards to their
Capitalism is the best economic system for many reasons. The first one is because the government believes in “ Laissez Faire”, which means “Hands off”. The government has no role
Adam Smith is considered as one of the most influential economists in the 18th century. Although his theories have been criticized by several socialist economists, however, his idea of capitalism still has great impact to the rest of the economists during classical, neo classical periods and the structure of today’s economy. Even the former Prime Minister of Britain, Margaret Thatcher had praised on Smith’s contribution on today’s capitalism market. She commented “Adam Smith, in fact, heralded the end of the strait-jacket of feudalism and released all the innate energy of private initiative and enterprise which enable wealth to be created on a scale never before contemplated” (Copley and Sutherland 1995, 2). Smith is also being recognized as the father of classical political economy and he has two famous published works that laid out the reasons to support his ultimate idea of capitalism.
Adam Smith’s The Wealth of Nations argues for a system of political economy that separates economy – the creation and distribution of wealth – from governmental interference. In Smith’s view, the economy of a nation grows as a direct consequence of private business ventures in the interest of each individual owner. Regulation by the government hurts the economy, and the progress of society is derived from the flow of the market. Things should be left in their natural states, thus maintaining a “natural order” of society. The basis of Smith’s thesis is that this natural order is driven by Man’s self-interest.
Two contrasting schools of thought relating to macroeconomics are classical economics and Keynesian economics. Their respective theories have persisted to the present day despite having been conceived centuries ago (Classical theory, 2016). Their significance is still relevant today, as their value lies in certain historical events that tested and tempered them. Events that shook the foundations of one institution while paving a path for the other. This paper will give a brief introduction of each one followed by an analysis of their underlying concepts in order to provide an accurate contrast and comparison. Late 20th century developments in macroeconomics will also be discussed, to serve as a testament to society’s continued progression of
An economic system is the institutions, organisations and methods used to deal with the problems of what kind of goods and services to produce, how and who should receive them that can affect a business, an area even the whole country. It can reflect the values, targets and development degree of a particular area. So, different economic systems are based on different situation of the businesses, areas or countries. However, there are three main kinds of economic systems: planned, market and mixed economy. Firstly, a planned economy is also known as a command economy, which means it can help to coordinate the operation of economic activities by collectivity such as the government controls rather than the free market regulation. This type of an economic system is especially applicable to developing countries because the government can control the production of goods and determine prices, output and wages for labour. It provides the basic demand for people to live. In contrast, in the market economy, market forces that mean the private ownership play the major part in economy activity of demand and supply. The government is at