Modern Economies & The US Economy

1. Modern Economies & The US Economy

2. Rise of Mixed Economies • No single economic system has all the answers • Centrally planned – too cumbersome • Traditional – little potential for growth • Market – has its drawbacks as well (as we witnessed over the past 3 years.

3. Adam Smith • Free-market system provides greatest benefits • Even Smith acknowledged need for some involvement • Modern society calls for greater involvement

4. Balancing Control and Freedom • Society must assess goals and values. • Some met by government, some by free-market • What is the opportunity cost?

5. Comparing Mixed Economies • Foundation of US economy – Free enterprise • Free enterprise – characterized by private or corporate ownership of capital goods. • Continuum.

6. Comparing Mixed Economies France Hong Kong Singapore Russia North Korea UK China Cuba US Poland Centrally Planned Free Market

7. Mixed Economies Where Government Intervention Dominates • N. Korea – one end of the scale • Gov. owns all property • State-owned industries produce 95% of goods. • China – ¼ of all enterprises are freely owned • In transition from central to free system

8. Mixed Economies Where Market Dominates • Hong Kong – One of the world’s freest markets • Private sector rules - Highly receptive to foreign investment

9. US Economy • Free enterprise • Gov. intervenes to keep order but low involvement • Some argue for more, some less • Private property protected

10. The Economy Today

11. Between 1997 and 2006, the price of the typical American house increased by 124%.