II Market Extremes A Pure Market Economy Hong

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II. Market Extremes A. Pure Market Economy

II. Market Extremes A. Pure Market Economy

Hong Kong is perhaps the best example of a pure market economy. It does

Hong Kong is perhaps the best example of a pure market economy. It does not have import or export taxes, or restrictions on investments coming in. There is no capital gains tax, no tax on interest gained from savings, no sales tax, and no tax breaks for muddle-butt companies that can’t make it on their own. The corporate tax rate is 16. 5% of profits (vs. 33% in the US). The individual tax rate is 15% of gross income (vs. 32% in the US). Hong Kong’s government consumes only 6. 9% of Gross Domestic Product (vs. 20. 8% in US). Hong Kong has no minimum wage, no unemployment benefits, no Social Security, no national healthcare program, and virtually no welfare. Hong Kong’s average unemployment rate is 3% (vs. 4. 5% in the US). Hong Kong’s per capita GDP is $26, 000, which is greater than Japan or Germany. Only the US ($28, 000), Luxembourg, and Switzerland have higher GDP’s. Excerpt from PJ O’Rourke’s Eat the Rich

1. No government involvement in business or economy.

1. No government involvement in business or economy.

The market rules! Where there is a demand, there is a supply.

The market rules! Where there is a demand, there is a supply.

“But if the government isn’t running things, who will guide the economy? ”

“But if the government isn’t running things, who will guide the economy? ”

Coke Machine on 9/24: Top Row (9 slots): 3 Cherry Coke (all sold out)

Coke Machine on 9/24: Top Row (9 slots): 3 Cherry Coke (all sold out) 6 Classic Coke (one sold out) Second Row (9 slots): 3 Sprite (all sold out) 3 Vanilla Coke (one sold out) 3 Diet Coke (none sold out)

Coke Machine on 10/13 • Top Row (9 slots) 6 Cherry Coke 3 Classic

Coke Machine on 10/13 • Top Row (9 slots) 6 Cherry Coke 3 Classic Coke Second Row (9 slots) 6 Sprite 2 Vanilla Coke 1 Diet Coke

Like the Coke machine, all segments of the economy will run themselves if left

Like the Coke machine, all segments of the economy will run themselves if left alone.

3. Adam Smith (1723 -1790) was the first to explain this.

3. Adam Smith (1723 -1790) was the first to explain this.

Smith advocated laissez-faire approach; if government keeps its hands off, individuals, acting in their

Smith advocated laissez-faire approach; if government keeps its hands off, individuals, acting in their own self-interest, will make the economy run more smoothly.

Smith described it “as if an invisible hand (all of our transactions) were guiding

Smith described it “as if an invisible hand (all of our transactions) were guiding the economy. ”

How is this video an example of the invisible hand in action?

How is this video an example of the invisible hand in action?

For each of the following sources, describe what is going on, and then explain

For each of the following sources, describe what is going on, and then explain what they all have in common.

1. The Jungle

1. The Jungle

2. William Hard

2. William Hard

“If men were angels, no government would be necessary. ”

“If men were angels, no government would be necessary. ”

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By late 19 th Century, the US economy strongly resembled laissez-faire. However, harmful externalities

By late 19 th Century, the US economy strongly resembled laissez-faire. However, harmful externalities arose.

The Progressive Era and the presidency of Teddy Roosevelt (c. 1901 -1915) marked the

The Progressive Era and the presidency of Teddy Roosevelt (c. 1901 -1915) marked the end of laissez-faire in America.

Extra

Extra

According to Adam Smith, what would prevent a company from making a product like

According to Adam Smith, what would prevent a company from making a product like the Ford Pinto?