DO NOW
Where would you place the United States on the scale below?
Mostly Entirely Mostly Equally Entirely Free Centrally Centrally Mixed Free Planned Planned Market Market Economic Systems – Part 4 - Mixed Economies
UNIT 2 – ECONOMIC SYSTEMS Learning Target
• I will understand the rise of mixed economic systems
• I will be able to interpret a circular flow model of a mixed economy
• I will be able to compare the mixed economies of various nations along a continuum between command and market systems. Reflect on your own freedom to make choices. • As a consumer, is there anything you are restricted from purchasing in the American economic system?
•As a laborer, are there any restrictions on the types of work you can do?
•As a taxpayer, can you decide how much you want to pay? The Rise of Mixed Economies
• Every economic system has problems:
• Traditional – little potential for change or growth
• Command – stifle innovation, fails to meet consumer needs, limits freedom
• Market – little focus on national defense, social inequality The Rise of Mixed Economies
• Early free market thinkers, like Adam Smith, believed an entirely free market provided the greatest benefit for society and raised the standard of living.
• They favored a laissez faire doctrine: a doctrine that government generally should not intervene in the marketplace.
• Yet, even Smith acknowledge the need for some limited degree of government involvement. • An economic system that blends elements of market economies with elements of command economies. Mixed • In this system, government is Economy always involved to some extent – but the degree of government involvement varies from nation to nation. National Defense Ensure Safety and Infrastructure Protect Private Fairness Property
The role of government
No nation today has a pure free market economy or a pure command economy.
Instead, modern economies are MIXED ECONOMIES.
DO NOW
Where would you place the United States on the scale below?
Mostly Entirely Mostly Equally Entirely Free Centrally Centrally Mixed Free Planned Planned Market Market Index of Economic Freedom The Heritage Foundation The Index of Economic Freedom is an annual index and ranking created in 1995 by The Heritage Foundation and The Wall Street Journal to measure the degree of economic freedom in the world's nations. The Most Free The Least Free 1. Hong Kong 180. North Korea 2. Singapore 179. Venezuela 3. New Zealand 178. Cuba 4. Switzerland 177. Rep. of Congo 5. Australia 176. Eritrea 6. Ireland 175. Equatorial Guinea 7. Estonia 174. Zimbabwe 8. United Kingdom 173. Bolivia 9. Canada 172. Algeria 10. United Arab Emirates 171. Djibouti VIDEO
INDEX Economic A period of change in which a nation moves Transition from one economic system to another
The process of selling businesses or services operated by the government to individual Privatization investors and then allowing them to compete in the marketplace • The United States is a mixed system, but the foundation of the U.S. economy is the free market.
• The U.S. is a free enterprise system: • Private or corporate ownership of capital goods • The marketplace operates with relatively limited A Mixed Economy Where the government regulation • Substantial government Free Market System role in providing services and promoting Dominates general welfare Circular Flow Model of a Mixed Economy - Transferring Money -
Government Government participates in the participates in Product Market: the Factor Market:
• Purchase goods and services. • Own land, labor, capital. • Need resources for offices, • The government telephones, pays 2.7 million computers. employees every year for • Provide goods their labor. and services such as roads. • That's a total of $152.2 billion. A Perspective on America's Mixed Economy China has the longest continuous history of any country in the world—3,500 years of written history.
The People's Economy
VIDEO What examples did you see of... • Traditional economy
• Economic Freedom
• Economic goals in conflict
• What else? Market Economy & Government