Capitalism: Midterm

Microeconomics

the study of how households (people) and firms make decisions; how & why they interact in markets: Marx, Smith, Schumpeter

Macroeconomics

the study of economy-wide phenomena, including inflation, unemployment, and economic growth; relations between large entities, states & governments in world affairs

Micro-Men

Smith, Marx, Schumpeter

Macro-Men

Keynes, Coase, Sen

Sen

Economic Man; well being, freedom, tolerance, governmental help, famines, nation-state involvement: Macro: Change via Command

Croase

Command, Competition, Contract, Costs: firms can solve issues that government can't (via private bargaining); government needed to reduce spillover but that's all: Macro: Competition as Command

Keynes

Created the global economy; led the Bretton Woods Agreement (IMF & World Bank), government involvement can resolve unemployment, increase demand & consumers will buy more; markets aren't always self-regulating (food desserts): COMMAND: government involvement

Marx

Capitalist Critic, Classes cause Conflict, Change: Political Economy: Micro

Smith

Original founder of the invisible hand; advocate of self-regulating markets; emphasizes competition: Micro

Schumpeter

Innovation, technical progress, change (creative destruction); challenger to capitalism by advocating for change: Micro

Interdisciplinary

Economic principles with insights from sociology, politics, & psychology; a political economy emphasizes interdisciplinary economics as an environment of micro and macro relations often emphasizing insights from sociology, political science and psychology (socio-economics)

Hunting & Gathering

The 1st economic system: cooperatively acquiring & sharing food; consensus decision making; no government; little private property; little inequality; no surplus product (cooperative, mobile clans, less surplus)

Slavery

The 2nd economic system: slaves do most of the productive work; their owners own the equipment & animals used in the production; own what the slaves produce; & control the government; the surplus product consists of slave owners' gain & control

Feudalism

The 3rd economic system: Serfs work both for themselves & hereditary landowners (lords) who ruled locally; serfs pay rent in kind & work a set number of days per year on the lord's land; the surplus product takes the form of rents & the outputs of the serf's forced labor (little $ made)

Independent Consumer Production

The 4th economic system: Families work on land they own; using capital goods & animals they own; control & own what they produce; make decisions themselves (own boss) & government is minimal; artisans, mom/pop; skill-based

Agrarian Despotism

The 5th economic system: A political elite governs; claiming the surplus product by taxing both landowning farmers and the tenants (the taxes overtake all profits for the capitalists, landowners, & laborers) - taxes in kind or currency

Communism

The 6th Economic System: Most economic decisions are made in accord with a plan drawn up and implements by a powerful central government; capital goods are state owned; economic inequality is in theory limited; government controls the surplus (emphasis on efficiency/quotas/units); Central Planning

Capitalism

The current economic system: Owners of capital goods hire wage labor to produce commodities to sell for a profit; employers make most economic decisions; substantial economic inequality exists; capital owners reap the surplus product as profit and other sources of property-based income

Adam Smith; the Wealth of Nations

Recall both our text & our class discussion of the term: Economic Man. Name the great economist, ____, who first advocated for this concept, and name his most widely read book (published in 1776), discussing the topic __________.

New York & the Erie Canal

Finished in 1825, over-land transport in the U.S was revolutionized by an inland canal in the state of _______, known as the ______________________.

Class

"The relationship between those who produce a product...and those who control the use of the surplus product is called a _________ relationship."

Textile; Water & People

Generally located in the northeastern states, what antebellum industry (_______), is considered by historians as the first to employ large groups of wage labor in the production of commodities? What was the industry's principal source of power for the machinery? ____________________.

Putting-Out Systems

In early US history, what was the system called when a manufacturer took partially completed materials to individuals in their homes & on the farms for further hand labor production? _____.

True

True or False: "Humans are unique among animals in that large numbers of unrelated people cooperate to produce the goods and services we require" _________________________.

True

In the 19th century, the sale of western lands & tariffs were the 2 chief sources of revenue for the United States' governments. _________________________________________.

Slave

In antebellum America there were 2 labels for describing labor-based production systems. One was known as free-based and the other was known as _________ -based labor.

Command, Competition, & Change

The approach presented in chapter 3 of our text is a 3-dimensional approach to economics. The 3 dimensions are ________________, _______________________, & _____________________.

False

True or False: In a capitalist economy, the way the surplus (profits) is typically used does not produce "rapid changes"

Jefferson, France, Louisiana Purchase

In 1803, President _________ negotiated a treaty with what country, _______, in which a territory known as __________ was purchased, and the result nearly doubled the United States.

Neoclassical Economics

Our principal authors prefer to label their approach to discussing capitalism, as an approach set forth in most economic textbooks is known as ______________________________________.

Panics

Today, our economy experiences periodic recessions or downturns. Before the 20th century, these "hard-times" cycles were referred to as _____________________________.

True

True or False: Social scientists & economists post that our current social structure of accumulation (since 1990s) in the process of decay.

Smith

Modern economies are dominated by large concerns

Smith

Division of labor implies economic interdependence

Coase

Government policies should facilitate private bargains

Sen

Democratically elected governments more likely to address poverty

Keynes

Unemployment is a chronic problem in a capitalist society

Marx

Economic systems have dominant & subordinate classes

Coase

Firms are mini-command economies based on giving & following orders

Coase

Capitalism is a mixture of competition & command

Keynes

Government market intervention reduces stability

Marx

Technical progress, knowledge growth, and conflict among classes foster perpetual change

Sen

Famines are not the result of shortages of food

Smith

Labor is the Basis of Wealth

Smith

The individual pursuit of self-interest has beneficial effects

Accumulation

Driven investment, including the process of mobilizing, transforming and exploding inputs required and capless production and selling the output

Sen

Economic Policy should promote freedom, tolerance & well-being

Schumpeter

Key to progress is innovation: creative destruction

Smith

Satisfaction of human needs is the measure of wealth of a nation

Schumpeter

Periods of prosperity & stability alternate with periods of stagnation & instability

Keynes

Markets are not self-regulating and often fail to sensibly use our productive potential

Marx

Members of classes work together in pursuit of common interests

Smith

Markets are self-regulating systems for the orderly coordination of the division of labor

Panic of 1819

The Panic of 1819 describes the first recession to occur during the Market Revolution's development. The panic arose from a weak or failing banking system in which banks could not maintain a balance between the cash and debt flow. At the time, banks made money by lending to the people and were responsible for maintaining a balance between the money held and the money lent. Banks were expected to maintain enough money to "rest on call" for clients seeking to alter or withdraw agreements. However, as banks were no longer reliant on species like gold and silver, balance management became more difficult, especially with the increasing amount of loans given out. The banks began issuing IOUs as an effort to maintain the gaps arising within the balance. However, when the government made changes to loan laws, the public panicked and sought to withdraw most money held by the banks, practically overnight. Consequently, the influx of withdrawal caused banks to scramble, entering bank runs and devaluing the currency from banks issuing de-valued bank-notes or using third parties to create currency.

Panic of 1819

1st Recession

Banks imbalanced in loans dealt & cash held as specie no longer on hand - led to currency de-valuing as IOUs & 3rd party printing replaced

Accumulation

Using surplus to better business

Money from the company back into it company

Making a profit & putting it back into business (for better)

Creates motivation, innovation, size, newness & changes; Fuels progress & changes (in all areas); driver of change)

Barrier to Entry

Obstacles that make it more difficult or costly to firms to enter our market, such as technical secrets, initial investments that are very large and exclusive marketing arrangements

Breakthrough

Occurs when a firm discovers or develops a new method of doing business

Business Cycle

Periodic expansion and contraction of output and employment usually taking place over a period of 3 to 10 years

Bureaucratic Job Ladder:

Primary, Independent, Subordinate, Secondary

Capitalist Epoch

Began in EU: 80 A.D. 1500: when capitalist organization of labor processes first appeared

Capitalism

1. Command down Competition

2. Hiring Wage Labor - slaves, owned production

3. Using Privately Owned Goods (property rights)

4. To Produce Commodities

5. To make a Profit (increase wealth/accumulate)

CLASS society & one of the many economic systems (7)

Producers & Controllers

Conflictual labor process as resulting relationships

Producers

wage labor used to make cheap commodities

Controllers

bosses, controls part of surplus OR reap the profits

Capitalist

Owner: provides an input of capital ($, land, material) & gets control over usage/paid

Class Relations

Labor division, social hierarchy (command, competition, conflict)

Collective Bargaining

Occurs when negotiating wages, employment conditions, workers occupation, representative collectively by union employers may also be collectively represented by an employers association

Command

Vertical dimension & represents the rules & guidance around employment (bosses)

Commercial Profits

Results from selling more products than it costs to purchase/produce

Contract

An agreement, either written, explicit or unwritten implicit commits to more parties to taking certain act actions such as making payments in delivering goods or services

Coordination by Command

Interactions are governed by specifying, precise behavior (orders; bosses)

Coordination by Rules

Place interactions are governed by general principles of behavior (economic system; norms)

Counter Cyclical Policies

Policies aimed at dampening the business cycle

Depreciation

The cost of restoring capital suffered and producing last year's output

Economy

Relationships among people that organizes labor processes of all societies to sustain production for profits

Economic Man

Refers to the assumption that human beings are calculating a moral and self-interest

Economic Hubs

An area of production that attracts people (despite geography)

Economy of Scale

Exists when an increase in the number of units of output produced and increase in the skill of production, brings about a fall in the average cause that is a fall in the cost per unit of output

Feudalism

The dominant economic system in Europe during the middle ages, obtain the surplus and other customary obligations owned by surfs

Innovation

Inventive ideas: key to progress (change): according to Schumpeter

Investment

Spending money to improve firms, predictive equipment, software facilities, workforce skills in order to increase productive capacity and productivity; pursuit of profit & survival prompts continuous change in tech/social

Labor Market

Market labor for a wage employees are the demand and workers are the suppliers of labor time

Labor Accord

Before 1860: slaves, independent producers, artisan production, nobles

Since 1860: working, new middle, old middle classes, capitalists

Long-Swing

Occurs over to 30-50 years, generally coincides with the consolidation phase of particular social structure of accumulation and is characterized by relatively high rates of investment and economic earth with relatively little unemployment may the long swinging is associated with the decay phase of the social structure, it is a period of stagnation with relatively little investment in high unemployment

Market

Exchange between strangers using money for commodity

Microeconomics

Deals with decisions that individuals, families & firms make, and why they make them

Macroeconomics

Decisions of individuals, families, firms, and governments produce outcomes, such as economic progress, or stagnation, inflation, or an employment for society as a whole

Middle Classes

Capital societies possess one but not attributes capital therefore, they stand in between the capitalist and the worker

Necessary Product

Replacement for what's used during the production (sum of inputs)

New Middle Class

Bosses: Doesn't own the capital but organizes the labor

Old Middle Class

Entrepreneurs: No wage labor; owner does most of the work (majority)

Political Economy

An interdisciplinary study that emphasizes the relationships among people within an economy of capitalism & democracy using sociology, psychology, facts, and politics

Putting-Out System

Fabric sent home to farmer (with loom) to make goods & profits as sidework; led to urbanization & industrialization

Production

A labor process whose output is a good or service

Private Property

Social institution that gives individuals or firms the right to use lender sell things such as land buildings are artistic, or intellectual creations of any kind means that one can have or use such things if one has made rented purchased or been given them

Property Rights

Establishes the right to control the property to decide who uses it and for what purpose, and to benefit from its uses or sale

Rents in Kind

How surplus went from surfs/slaves to the inherited land owners (taxes)

Reproduction

Expenditure of labor & surplus to a supporting activity (school, training, insurance); seeks to invest into the existing inputs (tools, skills)

Revenue

The profits or money available to spend (after expenses & taxes)

Social Structures of Accumulation

Structures (classes) arising within human economics