Chapter 2 Section 4 laissez faire the doctrine

Chapter 2 Section 4

laissez faire: the doctrine that states that government generally should not intervene in the marketplace free enterprise: private ownership; private decisionmaking

transition: period of change in which an economy moves away from a centrally planned economy toward a market-based system

privatize: to sell state-run firms to individuals or businesses Most contemporary mixed economies blend the market with government intervention, or involvement, in the marketplace

Adam Smith believed that a free market system would provide the greatest benefit for consumers and raise the standard of living. Markets couldn’t operate without some government intervention. They create property rights and patent laws.

As market economies have evolved, government intervention has become greater. Without laws insisting on competition, some firms would dominate others in their industry, and be able to charge consumers any price.

All of the economic systems in the world today are mixed economies. These systems use a combination of government involvement and free markets.

The government intervenes to keep order, provide vital services, and to promote the general welfare.

China is slowly making a transition to a free market economy. In the past it was excessively on the side of centrallyplanned.

In Hong Kong, the private sector rules the government that protects private property.

Banks in Hong Kong operate independently from the government.

North Korea is almost completely a centrally-planned economy. Hong Kong and Singapore have the economies that are the most freemarket.

In a free enterprise system investments are determined by private decisions then by the state.

continuum: a range with no clear divisions

Continuum of Mixed Economies Centrally-Planned Iran China North Korea Botswana Cuba South Africa Italy Japan Canada United States France Australia Germany Greece Peru Great Britain Market Singapore

In Sweden, when a child is born, his or her parents are entitled to a combined 450 days of parental leave with ¾ of their salary paid by the government.

foreign investment and free trade is encouraged protection of private propery Mixed Economies economic security disaster relief

Laura hears about a story that would make a good article. Laura’s editor assigns her a story to research for an article. Laura interviews several students. Laura writes an article and submits it to her editor Laura’s editor decides not to print the article in the next issue. This is a real-life situation that has been put into a flow chart. In economics, flow charts help show the way goods are produced, how money flows through the economy, and how decisions affect people. Laura’s editor revises the article and includes it in the next issue. Laura’s article appears in the newspaper that week.

What is laissez faire?

What is a continuum?

Why have some nations begun a transition to free enterprise?

Why are nations with centrally planned economies sometimes slow to succeed when they privatize industry?

What is free enterprise?

There is a yard sale this weekend in Megan’s neighborhood. Megan wants to make extra money this weekend. Megan sets up a stand, offering her homemade gourmet cookies for sale. Neighbors buy cookies from Megan. Neighbors do not buy any cookies from Megan decides to open her cookie stand next time a neighbor has a yard sale. Refer to this chart for the next 4 questions.

What does Megan do to try to make extra money?

Why does this flowchart split into two paths after Megan sets up her stand?

What step does Megan take if the neighbors like her cookies?

If neighbor do not like cookies, where could a step or steps be added so Megan could succeed next time?