capitalism Carol Mathias Adam Smith Father of Capitalism
- Slides: 34
capitalism Carol Mathias
Adam Smith - Father of Capitalism n Lived 1723 1790 in Scotland. n Economist and philosopher
The Wealth of Nations n Written in 1776 as a protest against mercantilism.
By the Way…. . . n FACTOID: n The full title of Adam Smith’s book is – An Inquiry into the Nature and Causes of the Wealth of Nations.
Mercantilism. n System set up by Jean Baptiste Colbert during Louis XIV time in France.
Louis had a problem…. n Being King was very expensive. n Louis needed money…. real bad!
Colbert had a solution! n. C + I + G + X - M = GDP n Decided –C to try + I + G + X = GDP
C + I + G + X = GDP n Colbert made King Louis rich. – opportunity benefit!
C + I + G + X = GDP n But what are the opportunity costs?
Adam Smith predicted…. n Revolution!! n People would get ticked off.
The American Revolution. . . n We weren’t allowed to spend our money the way we wanted.
The French Revolution n People really got ticked off!
Adam Smith proposed. . . n Capitalism! n Let the people decide the 3 economic questions!
Smith proposed. . . n People need incentives to work. n Profits are the best incentives.
People need incentives…. n PSYCHIC INCOME.
Entrepreneurs n People who take risks and create goods and services & enjoy profit.
Bill Gates House
Warren Buffet - Omaha’s billionaire. n Founded Buffy’s Buffet. n Chairman of Solomon Brothers Investments. Chairman of Borsheim’s Jewelry. Most expensive stock is Berkshire Hathaway. n n
Rose Blumkin – Nebraska Furniture Mart n n 1893 -1998 “Always sell cheap and tell the truth. ”
Famous entrepreneurs n Buffalo Bill Cody. n Created Wild West Show for world.
Ray Kroc - Founder of Mc. Donald’s n Began the fast food revolution.
n Adam Smith suggested an economy of entrepreneur s.
The Invisible Hand n One person’s acting in their selfinterest is likely others.
The Invisible Hand n Runs all through the economy. n Problems are solved by it as well.
What Role for Government in Capitalism?
Govt. only ties up the invisible hand. n Even when well-intentioned, government just “screws things up. ” n Government should just keep out of the way of business.
Laissez-faire. n French for “hands off”. n Govt. should be laissez faire with business.
Smith didn’t mean no government. n Government did have special jobs to make economy work.
Government’s Job n Provide Infrastructure for the system.
What Govt. Provides. n Fire & Police protection. n Transportati on system. n Public education. n Communicat ions.
Smith’s Role for Govt. n Court system to define property rights. n Military protection for borders and products.
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