economics is the study of how people in society choose to employ scarce resources to produce goods and services and dis

1. �Economics is the study of how people in society choose to employ scarce resources to produce goods and services and distribute them among various persons and groups in society.�

3. Adam Smith

4. Institutions of Capitalism

5. Comparative Economic Systems

6. Every man is no doubt, by nature, first and principally recommended to his own care; and as he is fitter to take care of himself than of any other person, it is fit and right that it should be so. Every man, therefore, is much more deeply interested in whatever immediately concerns himself than in what concerns any other man. Adam Smith TMS

7. It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.

8. He generally, indeed, neither intends to promote the public interest nor knows how much he is promoting it�.he intends only his own security; and by directing [his] industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Adam Smith, WoN

9. Self Interest is the motivation in Capitalism, but it is not a justification for immoral behavior. It gives us a reason to work hard not an excuse to do whatever we like.

10. There can be no proper motive for hurting our neighbour, there can be no incitement to do evil to another, which mankind will go along with�. To disturb his happiness merely because it stands in the way of our own, to take from him what is of real use to him merely because it may be of equal or of more use to us, or to indulge, in this manner, at the expense of other people, the natural preference which every man has for his own happiness above that of other people, is what no impartial spectator can go along with. Adam Smith TMS

11. One individual must never prefer himself so much even to any other individual, as to hurt or injure that other, in order to benefit himself, though the benefit to the one would be much greater than the hurt or injury to the other. Adam Smith TMS

12. Comparative Economic Systems

15. Comparative Economic Systems

16. Assumptions of Capitalism Rational Consumer Full and Accurate Information Costs/Benefits Contained in Transaction Income Fairly Distributed Institutions Functioning as Designed: (Implicit Assumption)

17. Assumptions of Capitalism Rational Consumer Not choosing the best product for the best price (e.g., impact of advertising) Choosing things that are bad for us and/or society (e.g., drugs, fortified wine, gambling, pornography, cigarettes,�)

18. Assumptions of Capitalism Full and Accurate Information Crucial to the proper functioning of markets Information Asymmetries (Seller has an inherent advantage.

19. Assumptions of Capitalism Costs/Benefits Contained in Transaction -- no negative externalities Costs of production that are borne not by the enterprise that causes them but by society. (p. 288) E.g., Pollution

20. Assumptions of Capitalism Income Fairly Distributed Wealth � impact on choices Theory of the Leisure Class, Thorstein Veblen Inheritance � non contributory wealth The Acquisitive Society, R.H. Tawney

21. Assumptions of Capitalism Institutions Functioning as Designed: (Implicit Assumption)

22. Assumptions of Capitalism Rational Consumer Full and Accurate Information Costs/Benefits Contained in Transaction Income Fairly Distributed Institutions Functioning as Designed: (Implicit Assumption)