Economy - economy is the social institution that ensures...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
economy is the social institution that ensures the maintenance of society through the production, distribution, and consumption of goods and services. Custom economies are organized around traditional ways of life as found in many agrarian societies where economic activities revolve around the family. Command economies are planned and directed through centralized control such as a monarchy. The industrial revolution was a scientific revolution whereby human and animal labor was replaced by machines. The industrial revolution had a profound impact on society and the organization of work by providing new forms of energy like the steam engine. This new labor force (who sold their labor for wages) became known as the proletariat. This phrase has been shortened to laissez faire , which refers to a type of economy that operates without government restrictions or regulations. Adam Smith provided the ideological basis for its legitimation. In 1776, Smith published his book, "An Inquiry Into the Nature and Causes of the Wealth of Nations." Smith argued that the wealth of a nation was determined by the amount of goods and services available to the population; not by the amount of wealth within the Monarchy's treasury. Smith's definition of the wealth of a nation became known as the gross national product (GNP), which is still used to measure productivity levels in societies. The principle of self-interest -- owners, workers, and consumers are motivated to maximize their self-interest. · The principle of supply and demand -- profits will be checked by market demands, wages will be set by the need for workers, and prices will be set by consumer desire for goods. · The principle of rationality -- competition motivated by self-interest will cause owners to find more efficient ways to produce quality goods at a lower price and thereby will reduce consumer costs. Smith referred to these principles as the invisible hand because he believed they provided a natural set of checks and balances on the economy. He argued that any type of restrictions or regulations that altered the invisible hand would undermine economic productivity, limit industry competition, and ultimately, decrease the nation's wealth. Capitalism is an economic system characterized by competition and private ownership of the means of production. In its "ideal" form, capitalism has four distinctive features: Private ownership of the means of production
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Pursuit of personal profit Competition Lack of government intervention The primary reason that ideal capitalism has failed to materialize was noted by Karl Marx who, along with his colleague Frederick Engels, devoted the bulk of his writing to the critique of capitalism (Marx and Engels 1848). Marx argued that laissez faire capitalism, as advocated by Smith and others, not only was repressive for workers but
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 09/12/2011 for the course SYG 2000 taught by Professor Ford during the Spring '08 term at University of Central Florida.

Page1 / 5

Economy - economy is the social institution that ensures...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online