CapitalismEconomic system in which Economic system in which investment in and ownership of investment in and ownership of the means of production, the means of production, distribution, and exchange of distribution, and exchange of wealth is made and maintained wealth is made and maintained chiefly by private individuals or chiefly by private individuals or corporations, especially as corporations, especially as contrasted to cooperatively or contrasted to cooperatively or state-owned means of wealth.state-owned means of wealth.

What do you think this quote means?

“The invisible hand at work within the market mechanism will ascertain that all the needs in society will be covered. Work is the basis for all well-being, while monopoly and cartels are obstacles for the beneficial processes.”

Adam SmithAdam SmithScottish Philosopher, 1723 – 1790Scottish Philosopher, 1723 – 1790An Inquiry into the Nature and Causes of the An Inquiry into the Nature and Causes of the Wealth of NationsWealth of Nations (1776) (1776)

• The ““Invisible Hand”Invisible Hand”

• Self-InterestSelf-Interest guides the most efficientefficient use of resources [laissez-faire]

• Public Interest is a “by-product”

Four [4] Components of Four [4] Components of CapitalismCapitalism

• LandLand

• LaborLabor

• CapitalCapital

• EntrepreneurshipEntrepreneurship

LandLand

““Gifts of Nature”Gifts of Nature”The essential raw materials required The essential raw materials required

to make a product.to make a product.

LaborLaborThose that produce the goodsThose that produce the goods

CapitalCapitalThis does This does notnot mean mean $$$ $$$ [Although every business needs it][Although every business needs it]

Capital GoodCapital Good: A “good” that is used in the : A “good” that is used in the production of other goods. [e.g. Loom]production of other goods. [e.g. Loom]

Consumer Good: A “good” that is Consumer Good: A “good” that is consumedconsumed by the general population [e.g. Clothes]by the general population [e.g. Clothes]

EntrepreneurEntrepreneur

Some one whoSome one who::

• Has a good idea they think will Has a good idea they think will generate a profitgenerate a profit

• Has the means by which to produce itHas the means by which to produce it

• Is willing to Is willing to ““take a risktake a risk””

ConclusionConclusion “ “Greed is Good” Greed is Good” **

** Unrestrained, it is also Unrestrained, it is also BADBAD [We’ll talk about that in a future lesson][We’ll talk about that in a future lesson]