COMPARATIVE ECONOMIC SYSTEMS

1. COMPARATIVE ECONOMICSYSTEMS ECONOMICS IN WORLD HISTORY

2. WHAT DOES THIS MEAN? Student needs to know the definitions of: 1. Traditional Economy 2. Market Economy 3. Command Economy 4. Mixed Economy

3. WHAT YOU NEED TO DO? Compare the economies of historical societies by focusing on their economic sectors.

4. ECONOMIC DEFINITION Economics is a Greek word meaning “management of the household.” In the ancient world, this was considered women’s work and the word is feminine in Greek. But the world over, women made the cloth and silk traded.

5. BASIC ECONOMICS Economics is the study of scarcity and how societies make economic decisions. In life, wants are unlimited and resources are limited. The result is scarcity.

6. BASIC ECONOMICS All societies make four basic economic decisions. 1. What to produce? 2. For whom to produce? 3. How much to produce? 4. How to distribute the produce?

7. ECONOMIC JOKE What is the economic “Golden Rule”? Answer: “He who has the ‘gold’ makes the rules!

8. WE ARE ALL MARXISTS! Irrespective of his role as its founding father, Marx was the first philosopher or economist to see all societal structures in an economic perspective. He felt you could not understand a system without understanding who owned the means (factors) of production.

9. CAPITALIST ECONOMISTS Adam Smith was the founding father of capitalism or free market economics. John Maynard Keynes was the founder of fiscal economics. The difference between the two was the role and influence of the state in economics.

10. FACTORS OF PRODUCTION All Societies use the four factors of production to meet their needs. 1. Land 2. Labor 3. Capital 4. Entrepreneurship

11. LAND Land represents the physical natural resources that the land possesses, its quality and its quantity. Land can be the dirt, the trees, the raw minerals, the water, or the food grown. Land earns rent in economic terms. All states possess “land.”

12. LAND EXERCISE In economic terms, describe the “land” of nomadic and prehistoric peoples, the river valley civilizations, the classical civilizations, and all major civilizations in the Post-Classical to Contemporary Ages.

13. LABOR Labor represents the number of people in a society who can do the physical labor. Labor is literally muscle power. If society uses mostly manpower to produce its needs, this is called labor intensive. Labor earns wages.

14. LABOR EXERCISE In the economic terms of labor, describe “work” in each of the historic periods and major civilizations.

15. CAPITAL Capital is not money. It represents the tools that societies use to produce their needs. All societies have capital as well as labor. If capital is used more extensively in a society than is physical labor, the society is capital intensive. Capital earns interest.

16. CAPITAL EXERCISE In economic terms, what is the capital of a(n) Nomadic society? Neolithic society? Classical society? Industrial society? Post-Industrial society? A fast-food business?

17. CAPITAL EXTENSION Why would a person or a businessman invest in capital? How?

18. ENTREPRENEURSHIP Entrepreneurship represents the economic equivalent of brain power and tendency to innovate. Not all societies encourage entrepreneurship, while others reward it. This is sometimes called intellectual capital and earns profit! Trade is entrpreneurial.

19. EXERCISE Entrepreneurship involves innovation and invention! Why do ancient societies not like innovation? How do they discourage it? How do modern societies reward innovation?

20. TRADITIONAL SYSTEMS In a traditional economic system, people make decisions based on their traditions and how earlier generations made decisions. Most often the elderly and clans make decisions for the good of those who constitute the “group.”

21. TRADITIONAL SYSTEMS In a traditional economic system, land is the major input. What you do not have, you do not have. Economies are subsistence, work is labor intensive - more work means more produce. Capital is simple or animal in nature and entrepreneurs are considered suspect.

22. TRADITIONAL SOCIETIES What historical societies are considered traditional? What aspects of modern society or states are considered traditional? When economic systems break down, why do they become traditional?

23. COMMAND ECONOMY In a command economy, decisions are made largely by an authority such as an aristocrat or a central government planning authority. It can be exercised in democratic or authoritarian societies. Quotas and restrictions are common.

24. COMMAND ECONOMY What ancient economies were largely command? Why might a hydraulic society (one dependant on control of water and irrigation) be considered command? What 20th century societies are or were command economies?

25. COMMAND ECONOMY Why does a war-time economy have to be command? Why would an economic crisis warrant a command economy? Can you name some historical examples? Was mercantilism a command economy?

26. MARKET ECONOMIES Market economies are sometimes called free markets. They represent decentralized decision making that is reflected in the unencumbered interplay of supply, demand, and price for goods and services No one is powerful enough to control the market.

27. MARKET ECONOMIES Market economies can only exist where goods are plentiful, have many close substitutes, and no restrictions on exchange. This is free trade. Additionally, consumers have many choices and no one choice is better than another.

28. MARKET ECONOMIES Several of the key ideological components of market economies are the rights to own private property (capital) and to dispose of it in any way you want to make profits without restrictions. “Land” is sold to the highest bidder and labor seeks a fair wage.

29. MARKET ECONOMIES Based on the previous definition, do market economies exist? If so, under what conditions? Would you consider the United States a market economy? Why or why not?

30. MARKET ECONOMIES What is a black market? Why might one be considered a “free market” economy? What might the Drug Trade be considered a “market” economy?

31. MIXED SYSTEMS Ok, but all economic systems throughout history have been or are mixed to some lesser or greater degree.

32. MIXED EXERCISE Can you identify which aspects Of any famous historical economy are traditional, command, and market?