Post on 03-Jan-2016
American Free EnterpriseAmerican Free Enterprise
How much Government?How much Government?Too Much?Too Much?
Not Enough?Not Enough?
Citizen advocates for policy change
Concerns of the public as a whole
Laws and standards in response to interests of the public
FeaturesFeatures
Economic FreedomEconomic Freedom CompetitionCompetition Private PropertyPrivate Property ContractsContracts Self-InterestSelf-Interest Voluntary ExchangeVoluntary Exchange Profit MotiveProfit Motive
FeaturesFeatures
Economic FreedomEconomic Freedom CompetitionCompetition Private PropertyPrivate Property ContractsContracts Self-InterestSelf-Interest Voluntary ExchangeVoluntary Exchange Profit MotiveProfit Motive
AmericanLibertyChoice
FeaturesFeatures
Economic FreedomEconomic Freedom CompetitionCompetition Private PropertyPrivate Property ContractsContracts Self-InterestSelf-Interest Voluntary ExchangeVoluntary Exchange Profit MotiveProfit Motive
Regulates the marketplace: more choices = better quality for lower price
FeaturesFeatures
Economic FreedomEconomic Freedom CompetitionCompetition Private PropertyPrivate Property ContractsContracts Self-InterestSelf-Interest Voluntary ExchangeVoluntary Exchange Profit MotiveProfit Motive
Rules for doing business.Makes it fair.Preserves resources.
FeaturesFeatures
Economic FreedomEconomic Freedom CompetitionCompetition Private PropertyPrivate Property ContractsContracts Self-InterestSelf-Interest Voluntary ExchangeVoluntary Exchange Profit MotiveProfit Motive
Motivates trade.Promotes Efficiency.
Reduces waste.
Private SectorPrivate Sector
Involves transactions of individuals Involves transactions of individuals and businessand business– SportsSports– Telecommunications Telecommunications – Shopping mallShopping mall– GroceriesGroceries– AutomobilesAutomobiles– Housing Housing
Public SectorPublic Sector
Involves transactions of the Involves transactions of the governmentgovernment– Parks and recreationParks and recreation– MilitaryMilitary– EducationEducation– Food policyFood policy– Energy sectorEnergy sector– Mortgage industryMortgage industry
Government ProtectionsGovernment Protections
Health and SafetyHealth and Safety EnvironmentEnvironment ConsumersConsumers PoorPoor
– RedistributionRedistribution– ReeducationReeducation– MedicalMedical– TANFTANF
Fish Game“Tragedy of the Commons”Opportunity Cost of Trade
Free RiderFree Rider
Someone who would not pay for a Someone who would not pay for a
g/s unless it is publicly providedg/s unless it is publicly provided
LibraryLibrary
ParkPark
School School
When have you been a free rider?When have you been a free rider?
Externality Externality
Economic side effect of doing Economic side effect of doing businessbusiness
Effects other than what was intendedEffects other than what was intended– ExamplesExamples
PositivePositiveNegative Negative Market Failures
Technology FactorTechnology Factor
Increase EfficienciesIncrease Efficiencies InnovationInnovation
– Encouraged by Government withEncouraged by Government withFundingFundingEducationEducationResearchResearchLicensingLicensingPatentsPatentsCopyrights Copyrights
R & D GraveyardR & D Graveyard
Difficult to get fundingDifficult to get funding
GovernmentFunding
BusinessFunding
Loss of Funding
Innovation TheoryConceptual
CommercialProductionEngineered
Many Projects Die
Expanded Circular Flow ModelExpanded Circular Flow Model
Government HouseholdsFirms
Imports ExportsProduct Market
Factor Market
Financial Institutions
Finance ServicesInvestment
Phases of the Business Phases of the Business CycleCycle
Expansion
Peak
Contraction
Trough
GDP/GNP numbers are on the rise
Highest point of economic expansion
Lowest point of economic contraction
GDP/GNP numbers are on the decline
Degree of ContractionsDegree of Contractions RecessionRecession
– Prolonged economic contractionProlonged economic contraction2 consecutive quarters of negative 2 consecutive quarters of negative
growthgrowth
DepressionDepression– Recession that is especially long and Recession that is especially long and
severesevere
Recent US cyclesRecent US cycles
1980
1990
2000
1-2 years of correction
5-8 years of growth
Efficiency Efficiency Capital DeepeningCapital Deepening
– Process of raising capital per workerProcess of raising capital per worker– Stock investment makes money Stock investment makes money
available for companies to spendavailable for companies to spend Technological ProgressTechnological Progress
– Growth – (capital + labor)Growth – (capital + labor) Depreciation Depreciation
– Loss in value of capital goodsLoss in value of capital goods