History of Classical Liberalism The Introduction of Capitalism

 Scarcity:

• Humans have unlimited needs and wants

• The earth has a limited amount of resources. These include: Land, Labour, and Capital

• These limited resources create scarcity

The difference in economic systems is determined by how a society allocates resources by answering the following basic economic questions

• What to produce?

• How to produce it? 

• Who gets it? (how to distribute it)

 Economic Systems:

There are three basic economic systems- There is a fourth - - Traditional economies (are rare)

• #1 Market economy- also known as capitalism, free market, private enterprise

• #2 Planned economy- also known as socialism, and in extreme forms, communism, centrally planned, public enterprise.

• #3 Mixed Economy- can range from welfare capitalism, to highly socialistic economies

 Mercantilism prior to the 19th century

• Competition between nations for gold/silver= power

• Protective tariffs, monopolies, limited international trade (colonies and mother country), high levels of government regulations. Ex. hudson's bay company

 Historical events leading to classical liberalism:

Protestant reformation

• Value of hard work, thrift material and growth

 Historical events leading to classical liberalism:

Industrial revolution

• Transportation= new markets/resources 

• Population explosion = new labor/markets

• Success in europe = spread throughout the world

 Historical events leading to classical liberalism:

Liberal Movement (classical liberalism)

• Merchants complain about government restrictions

• Believed that the economy should be free to follow natural laws (supply/demand)

• Believed people motivated by self-interest; competition encouraged better production by workers.