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6LectureS11 - LECTURE 6 Today is Thursday February 3 2011...

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LECTURE 6 Today is Thursday, February 3, 2011. The unemployment rate of the U.S. labor forced decreased from 9.4% as of January 1 to 9% as of February 1. However, in January, only 36,000 new jobs were created! Three million people have given up and stopped looking for work. The number of people working in the U.S. is the lowest number in 26 years. DEMAND, SUPPLY, AND THE PRICE SYSTEM In all the countries of the world, throughout all of human history, scarcity of resources has been a fact of nature. All scarce resources have alternative uses. As such, all the countries of the world; all societies; all groups of individuals; all governments have had to answer the following five questions: 1. How much can we produce? 2. What will we produce? 3. Who will produce it? (How will we produce it?) 4. Who will get it, after it is produced? 5. How do we change the answers to these questions in the light of different circumstances in the future? As we noted in class, at different times in the past in different countries, societies have organized their economies in different ways. In the United States, the Founding Fathers adopted a constitution that ensured that we would rely on the free market system to answer these questions. Over the semester we shall analyze this system in great detail. We also mentioned some alternative systems. COMMAND ECONOMY (Your text calls these systems centrally planned economies.) There are three main types, Socialism , Communism , and Fascism . Socialism is “a political and economic theory that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole; in Marxist theory, a transitional social state between the overthrow of capitalism and the realization of communism.” We discussed that the classic example of this kind of system was the Soviet Union under Joseph Stalin who was the General Secretary of the Communist Party of the Soviet Union between 1922 and 1953. There are two problems with this particular system. First, the community as a whole didn’t get to run the system, Stalin did, and he ended up killing twice as many individuals as
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Hitler, over 20 million. And second, we can’t find a socialist system that ever worked; that efficiently allocated scarce resources to satisfy the wants and needs of the individuals living in the socialist society. The Soviet Union collapsed in 1991, and since then has gone through the throes of becoming capitalist. Communism is “a political theory derived from Karl Marx, advocating class war and leading to a society in which all property is publicly owned and each person works and is paid according to their abilities and needs.” Communism is imaginary, and an ideal to be sought and achieved. All that eventually happens is that a lot of dissenters end up getting killed by idealists such as Stalin (Soviet Union), Chairman Mao (China), Pol Pot (Cambodia), Kim Jong- il (North Korea), and so on.
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