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1) As a social order, we have to figure out three things:
- What will we produce?
- How to produce it?
- Who will get it?
2) Two different economic systems: market economies and planned economies.
a. In planned economy, government controls labor, land and capital.
b. Communism is primarily defined by the lack of private property. Class-lessness is a symptom of having no private property. There are no communist countries in the world.
c. Often socialism has some private property and some public ownership.
d. Command economy is totally controlled by government.
f. In market economies, individuals control production to get profit.
Invisible hand - the unintended social benefits resulting from individual actions.
"It's not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from the regard to their own interest."
The mechanism of the invisible hand is that if you produce unwanted or shoddy products, a competitor will produce better more desirable products and put you out of business. This results in businesses that produce the things that people want/demand most, at lower prices.
Inflation ..
Monetarism ..
1) As a social order, we have to figure out three things:
- What will we produce?
- How to produce it?
- Who will get it?
2) Two different economic systems: market economies and planned economies.
a. In planned economy, government controls labor, land and capital.
b. Communism is primarily defined by the lack of private property. Class-lessness is a symptom of having no private property. There are no communist countries in the world.
c. Often socialism has some private property and some public ownership.
d. Command economy is totally controlled by government.
f. In market economies, individuals control production to get profit.
Invisible hand - the unintended social benefits resulting from individual actions.
"It's not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from the regard to their own interest."
The mechanism of the invisible hand is that if you produce unwanted or shoddy products, a competitor will produce better more desirable products and put you out of business. This results in businesses that produce the things that people want/demand most, at lower prices.
3) Modern economies are neither completely free market nor planned. There's a spectrum of government involvement.
4) Circular flow model.
a. Modern economy is made above households (individuals like him and you) and businesses.
b. Businesses sell goods and services to households in product market.
c. Households earn the money by selling labor to businesses.
d. Businesses pay for the resources on resource market.
f. Government also buys products and resources, i.e. to buy cars from businesses and hire policemen to drive them.
e. Government gets the money from taxes, households and businesses (and borrowing).
a. Modern economy is made above households (individuals like him and you) and businesses.
b. Businesses sell goods and services to households in product market.
c. Households earn the money by selling labor to businesses.
d. Businesses pay for the resources on resource market.
f. Government also buys products and resources, i.e. to buy cars from businesses and hire policemen to drive them.
e. Government gets the money from taxes, households and businesses (and borrowing).
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