2/5 – Economic Systems

1. 2/5 – Economic Systems • AIM:  To examine CEO pay as a factor payment. • Factor Payment: The income people receive for supplying factors of production – land, labor, capital, or entrepreneurship.

2. CEO Pay Debate • The class will be split into four teams. (2 per side) • Tonight, read through the resources on the web. Take notes for BOTH side. • Tomorrow your side will be determined by a coin toss. You will have 15 minutes to prepare once your side is determined.

3. 2/6 – CEO Pay • AIM: Are American CEO’s overpaid? • Opener: What factors might go into determining somebody’s salary?

4. 2/11 – Wealth of Nations • AIM: What were Adam Smith’s contributions to economics? • Opener: Download the reading from the weekend (online at THHS website). Then, write: • Two interesting facts you learned. • One question you have about the reading.

5. How does Adam Smith answer these questions?

6. Competition & Self-Interest • What roles do competition and self-interest play in Adam Smith’s economic vision?

7. Scenarios: • Explain the following scenarios from the viewpoint of Adam Smith: • The rise of the phone companies BoostMobile and MetroPCS • The popularity of Apple computer products

8. “Monopoly” as the Enemy • Explain the following quote from the reading: • “The great enemy to Adam Smith’s system is… monopoly in any form”.

9. Law of Accumulation vs. Law of Population • How do these two “laws” balance each other out?

10. http://www.slate.com/blogs/moneybox/2013/02/07/david_einhorn_sues_apple_over_its_cash_stockpile.htmlhttp://www.slate.com/blogs/moneybox/2013/02/07/david_einhorn_sues_apple_over_its_cash_stockpile.html

11. The Role of Government What roles of government might be missing from Smith’s view? Explain.

12. 2/13 – Command Economies • AIM: What does life look like in a command economy? • Opener: Can you explain this political cartoon?

13. Economic System: The method used by a society to produce and distribute goods and services. • There are four different economic systems: • Traditional economy • Relies on habit, custom, or ritual • Market Economy (capitalism) • Decisions made by individuals • Command Economy (associated with communism/socialism) • Decisions made by central government • Mixed Economy • Combination of market and command economies

14. Introduction to Command Economies • SocialismvsCommunism – what’s the difference?

15. Introduction to Command Economies • SocialismvsCommunism – what’s the difference? • Socialism is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society.

16. Introduction to Command Economies • SocialismvsCommunism – what’s the difference? • Socialism is a social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout a society. • Communism is a political system that arose out of the philosophy of socialism. It is an authoritarian system where all economic and political power rest in the hands of a central government.

17. East Germany as an example of a communist society • East Germany arose out of the defeated Nazi Germany of World War 2. • In 1945, the Allied powers divided up Germany into four sections. The sections controlled by the USA, Great Britain, and France combined to form West Germany, a free-market democracy. • The section controlled by the USSR became East Germany, a communist state. • Looking at a divided society like East & West Germany is an interesting way to examine how competing philosophies of democracy and communism worked out. • In the end, it didn’t work out. On the 9th of November, 1989, protests forced the end of the East German government. East and West Germany were reunited in 1990 as a free-market democracy.

18. East Germany as an example of a communist society • SED = SozialistischeEinheitsparteiDeutschlands (Socialist Unity Party of Germany) • GDR / DDR = German Democratic Republic / Deutsche DemokratischeRepublik(East Germany)

19. Group Reading and Presentations • Assignment: • Prepare a brief presentation to the class how life in East Germany reflects the ideals of a centrally planned economy. • Contrast the East German lifestyle with that of a free-market economy. • What are both the benefits and disadvantages of the East German lifestyle?

20. Group Research and Presentations • “The dream of full employment” + “planned economy without a plan” • “Sold-out” + “State Owned Product Worlds” • “Home sweet home” • “Sibylle fashion dreams”

21. Chapter 2 Homework Review • Page 27 • 2: Each system answers production and distribution questions differently • 6: Military and a decent quality of living for its citizens • 7: • Traditional values custom • Market values individual freedom and growth • Central values economic equity & security • Mixed values economic freedom and limits on gov’t

22. Chapter 2 Homework Review • Page 32 • 6: Combination of self-interest and competition would lead to an economy offering desirable products at reasonable prices • 8: Economic equity is difficult to achieve in a free market economy because not every person functions in the market with the same skills and abilities & therefore differences in compensation arise.

23. Chapter 2 Homework Review • Page 38 • 1: In both socialist and communist nations, the gov’t often owns major industries. But socialism is achieved peacefully through democracy. Communist gov’ts control both political and economic power; they are authoritarian. • 5: Centrally planned economies eliminate competition, giving businesses no incentive to produce goods of high quality. Also the bureaucracy is slow to respond to consumer wants/needs.

24. Chapter 2 Homework Review • Page 44 • 1: Laissez-faire is the doctrine that states that gov’t should not intervene in the marketplace • 4: Your answer should discuss individual vsgov’t role in the marketplace.