1. Agenda Bellringer Review Questions Notes: Economic systems with Index Cards Exit Ticket Mod 3: Thematic Essay due Friday

2. Review Questions Name one negative effect on people caused by urbanization Tenements, disease, crime, poor urban planning Name one negative working condition people endured in factories No min wage, no safety protocols, child labor, no education Name the five factors of production Land, labor, physical capital, financial capital, human capital What is mercantilism? Favorable balance of trade for mother countries, exploiting the colonies What was the cottage system? Traditional style economy, self sufficient, take care of yourself

3. Review Agrarian Revolution and FOP in GB Factory system and urbanization Unhealthy working and living conditions Economic theorists look to solve problems resulting from market economy Government reforms and interventions take place Industrialization globalized. Seeking of new raw materials

4. Objective Students will identify how Karl Marx and Adam Smith believed the problems of capitalism caused by the industrial revolution would be resolved

5. Economic Systems and Theorists

6. Remember? The industrial revolution brought with it many problems in three areas: Factory system: labor issues and safety issues Urbanization: living standards, social classes Pollution: rivers, chemicals, air

7. Economic Theorists Economic theorists around the world began theorizing how to solve these problems Economy is the allocation of resources. An economist studies how to do that. We must allocate resources because of the issue of scarcity. Scarcity: unlimited wants yet limited resources Allocate: To distribute

8. Economic Systems The economic theorists considered each of the following economic systems and identified what they thought was best and why They also offered their ideas for improvements The Industrial revolution was an example of a massive shift from a traditional economy to a market economy

9. Economic Systems TraditionalMarketCommandMixed Barter Self Sufficient Products made based on history, customs, tradition Ex: manorialism in Europe, Pygmies in Africa, Inuits in Alaska Currency Products made based on consumer wants and needs Private property, choice, competition, no govt regs Ex: GB after IR Everyone contributes what they can and receives what they need Products made based on what the government deems is necessary Ex: Soviet Union, Cuba Consumers choose what they want and need Government has some regulatory power Tradition dictates some production Ex: United States

10. Traditional Advantages No unemployment No recession/depression Disadvantages No new ideas Creativity discouraged Lower standard of living

11. Market Advantages Total consumer freedom Incredible variety Lots of new ideas/creativity Disadvantages Only productive people rewarded Unemployment Competition Depression/recessions Public needs sacrificed

12. Command Advantages Public needs met No unemployment Everyone equal Disadvantages Wants not considered No incentives New ideas discouraged

13. Mixed Advantages Consumers drive economy Producers respond Gov’t intervenes when necessary Disadvantages Public needs lacking unemployment Depressions/recessions

14. Karl Marx

15. Karl Marx and Friedrich Engels Karl Marx and Freidrich Engels witnessed the treatment of workers in factories during the industrial revolution They heard the working class people complaining about the upper class They suspected that at some point, the workers will have had enough and will revolt against their bosses and steal their wealth to distribute amongst themselves

16. Karl Marx and Friedrich Engels They wrote their ideas down in a pamphlet called “Communist Manifesto” Bourgeoisie: upper and middle class people Proletariat: working class and poor people The Bourgeoisie controlled the factors of production, while the proletariat labored in terrible conditions and controlled nothing

17. Karl Marx and Friedrich Engels When the proletariat revolted against the bourgeoisie, they redistribute wealth amongst themselves This would eliminate class struggle – everyone would be equal This new world and government would be called “dictatorship of proletariat”

18. Communism This control of wealth and factors of production by the proletariat is what Marx and Engels referred to as Communism Communism: all factors of production will be owned by the people. No private property. In the 1900’s we will see many of these communist revolutions…

19. Communism Communism = Command economy = Karl Marx

20. Index Card Please create a new index card for Karl Marx and Friedrich Engels

21. Karl Marx and Friedrich Engels “Communism Manifesto” Created idea of communism (command economy) Proletariat: poor/working class; Bourgeoisie: upper/middle class No private property, no social classes

22. Adam Smith “Father of Economics”

23. Adam Smith Wrote “Wealth of Nations” Laissez-Faire: The government should not interfere with the economy in any way UNLESS the factors of production are compromised

24. Adam Smith Three principles of free-market economics 1. Law of self-interest: people will work for their own good 2. Law of competition: competition amongst people makes better products 3. Law of supply and demand: goods will be produced to meet demand which will equalize prices

25. Adam Smith The principle of supply and demand is also known as the “invisible hand” Invisible hand: consumer demand and producer response will self-regulate the economy This is called capitalism

26. Adam Smith Capitalism = Market economy = Adam Smith

27. Index Card Create an index card for Adam Smith

28. Adam Smith Market Economy Laissez faire: NO government involvement in economy Free market principles: Law of competition, self-interest, and supply and demand Invisible hand: the market will self regulate because of supply and demand

29. Exit Ticket What type of economy did Karl Marx advocate? Command What type of economy did Adam Smith advocate? Market What are the five factors of production? Land, labor, physical capital, human capital, financial capital What does scarcity mean? Unlimited wants and limited resources What does laissez-faire mean? No government involvement

30. Who said it? On your white boards, tell me who said each of the following ideas: Marx or Smith?

31. Marx or Smith? The proletariat will revolt against the bourgeoisie

32. Marx or Smith The economy will self regulate based on supply and demand. This is called the invisible hand

33. Marx or Smith There should be no government involvement in the economy unless the FOP are compromised (Laissez Faire)

34. Marx or Smith Dictatorship of the Proletariat

35. Marx or Smith Market economy

36. Marx or Smith Command economy

37. Marx or Smith No private property. All FOP owned by the people equally

38. Marx or Smith No private property. All FOP owned by the people equally