Ch 8 - The Economy 

• Economy: a system of producing and distributing goods and services
• Subsistence economy: an economy which is not based on money, and which relies on barter between communities instead
  → earliest human groups, hunting and gathering societies had this economy
  Industrial societies: the birth of the machine, the steam engine was invented in 1765, and influenced industrial societies.
  → societies powered by fuels, these societies created a surplus
  → this stimulated trade among nations and brought even greater social inequality
• %%The post-industrial societies brought by the birth of the information age%%

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This society included:

1. a service sector so large that most people work in it,

2. a vast surplus of goods

3. more intensive trade among nations

4. a wider variety and quantity of goods available to the average person

5. information explosion

6. interconnected global village-that is, world’s nations are linked by fast communications, transportation, and trade.

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• Biotech Societies: the merger of biology and economics

→ Technological advancements in this society allow us to lead longer and healthier lives

→ Effect on inequality is likely to be spotty

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• Mediums of Exchange:
  The Earliest medium of exchange is recorded with %%hunting and gathering societies, pastoral, and horticultural societies%% as they produced little surplus, people bartered and directly exchanged one item for another

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1. Medium of exchange in %%Agricultural societies%%: bartering continued, however, people started using money (in the form of sea shells to gold) as currency

→ Deposit Receipts: transferred ownership of a specific amount of gold, silver, or grain.

• These receipts were deposited in a warehouse or bank
• Towards the end of the agricultural period, deposit receipts became formalised into currency (paper money)
• Currency and deposit receipts represented stored value → gold and silver coins continued to circulate along deposit receipts and currency

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2. Medium of exchange in I%%ndustrial Societies%%: People stopped bartering

• Gold standard: Gold was replaced by paper currency
• Fiat money: is a currency issues by a government that is not backed by stored value
  → with no stored value, dollars can be printed in any amount a government desires

→ Fiat money caused coins made of precious metals to disappear from circulation. Gold coins disappeared first, then silver ones.

→Governments still have a limit as to how much money they can print. Prices increase if a government issues currency at a rate higher than the growth of (GDP)

• GDP: gross domestic product, the total goods and services that a country produces

The industrial period also led to the invention of credit cards

• Credit cards: a device that allows someone who has approved a specific amount of credit to purchase goods without an immediate exchange of money

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3. Medium of exchange in post-industrial societies: during the early Post-industrial society (information age), a new development, debit cards, were invented.

• Debit cards: a device that electronically withdraws the cost of an item from the card holder’s bank account
• E-cash: money stored on a company’s computer that can be transferred over the internet to anyone who has an account with that company.

→ Governments dislike the development of e-cash, as the transactions bypass banks, making it difficult to monitor the financial activities of their citizens.

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World Economic Systems:

• Capitalism: An economic system built around the private ownership of the means of production, the pursuit of profit, and market competition

Features of capitalism:

• Private ownership of means of production
• Market competition (competing with one another, owners decide what to produce and set prices for their products)
• Pursuit of profit (owners to sell their products for more than they cost)

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State Capitalism:

• Pure capitalism laissez-faire capitalism “hands-off”, means that government doesn't interfere in the market
• Private citizens own the means of production however they must abide by laws which protect the population and ensure that the government can collect taxes

→John Rockefeller: achieved the capitalist's dream, a monopoly, the control of an entire industry by a single company

→ Socialism: an economic system built around the public ownership of the means of production, central planning, and the distribution of goods without a profit motive

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Components of Socialism:

• Public ownership of means of production
• Central planning: central committees plan production and set prices with no competition

%%→ In a socialist economy, the government owns the means of production (not just factories- but land, railroads, oil wells, and gold mines%%

%%→ In a capitalist economy, the market forces supply and demand which determines what will be produced and price changes%%

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