12/06/2009

Free Market Capitalism (def)

A Free market, Competitive economy, is one in which there are a number of suppliers, and consumers, each of which can not, does not, signifficantly set the price for the "thing".

  • Adam Smith (1776) - theorized that specialization lead to efficiency and that Free Markets could coordinate the supply of goods to allow specialization of function., thus raising living standards (page 28)
  • The theory was that Free Markets would lead to a price close to the cost of producting the products, Raw Materials, Labor, and Capital.
  • The purpose of Government was to provide for the National Defense, Ensure that Laws, contracts and property rights were properly enforced. e.g Laissez-faire, (but Smith also mentioned and somehow preventing swindles and speculative panics (page 35), erecting and maintaining certain public works and certain public instutions(page 34))
  • The ultimate goal of an economic policy was maximizing a countries wealth, ... the gross domestic product. (page 31)

Note (Smith understood that:):
  • some Un-regulated markets are unstable, not self correcting.

  • some Public works and instutions would be beneficial.

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