Core Ideas of Liberalism: The Economy

What is a key liberal work about the economy?

The Wealth of Nations, Adam Smith (1776)

What is the central liberal belief to economics?

Right to property

Who establishes the core belief in the right to property?

Locke

Why do liberals support capitalism?

• Free market incetivises the individual to make rational choices about making contracts, buying and selling, investing

• Embodies freedom

What is the free market?

Economic system where goods and services are exchanged with minimal government interference

→ Prices and production are decided by supply and demand

How should the government be involved in the economy?

Should be limited to ensuring that property is secure and contracts are honoured to allow for free trade and competition

What is the ‘invisible hand’ of the market?

Individuals are led by an ‘invisible hand’ to make rational choices

→ e.g. When products are abundant, people will pay less and investment is moved to other areas

How do modern liberals (e.g. Green) see free-market capitalism?

Creates social and economic obstacles to individuals achieveing their full potential

What did this modern liberal view of capitalism lead to?

Endorsement of Keynesian economics

What characterises Keynesian economics?

• Acceptance of government involvement to steer the economy

• Markets don’t always self-correct

• Government spending can boost demand

• Acceptance of deficit spending in the short term

What do feminist liberals argue about women in the economy?

• Women should be given full and equal access to employment opportunities

• Enables full contribution to the free-market economy

What do feminist liberals (e.g. Friedan) argue about state intervention in the economy?

The state should help to bring this about

→ e.g. anti-discrimination measures

Where can liberal economic ideas be seen in real life?

FDR’s New Deal