2/5 – economic systems

2/5 – Economic Systems

• AIM: To examine CEO pay as a factor payment.

• Factor Payment: The income people receive for supplying factors of production – land, labor, capital, or entrepreneurship.

• The class will be split into four teams. (2 per side)

• Tonight, read through the resources on the web. Take notes for BOTH side.

• Tomorrow your side will be determined by a coin toss. You will have 15 minutes to prepare once your side is determined.

CEO Pay Debate

2/6 – CEO Pay

• AIM: Are American CEO’s overpaid?

• Opener: What factors might go into determining somebody’s salary?

2/11 – Wealth of Nations

• AIM: What were Adam Smith’s contributions to economics?

• Opener: Download the reading from the weekend (online at THHS website). Then, write:– Two interesting facts you learned.– One question you have about the reading.

• How does Adam Smith answer these questions?

Competition & Self-Interest

• What roles do competition and self-interest play in Adam Smith’s economic vision?

Scenarios:

• Explain the following scenarios from the viewpoint of Adam Smith:

• The rise of the phone companies BoostMobile and MetroPCS

• The popularity of Apple computer products

“Monopoly” as the Enemy

• Explain the following quote from the reading:

• “The great enemy to Adam Smith’s system is… monopoly in any form”.

Law of Accumulation vs. Law of Population

• How do these two “laws” balance each other out?

http://www.slate.com/blogs/moneybox/2013/02/07/david_einhorn_sues_apple_over_its_cash_stockpile.html

The Role of Government

What roles of government might be missing from Smith’s view? Explain.

2/13 – Command Economies• AIM: What

does life look like in a command economy?

• Opener: Can you explain this political cartoon?

• Economic System: The method used by a society to produce and distribute goods and services.

• There are four different economic systems:– Traditional economy

• Relies on habit, custom, or ritual– Market Economy (capitalism)

• Decisions made by individuals– Command Economy (associated with

communism/socialism)• Decisions made by central government

– Mixed Economy• Combination of market and command economies

Introduction to Command Economies

• Socialism vs Communism – what’s the difference?

Introduction to Command Economies

• Socialism vs Communism – what’s the difference?– Socialism is a social and political philosophy based

on the belief that democratic means should be used to distribute wealth evenly throughout a society.

Introduction to Command Economies

• Socialism vs Communism – what’s the difference?– Socialism is a social and political philosophy based

on the belief that democratic means should be used to distribute wealth evenly throughout a society.

– Communism is a political system that arose out of the philosophy of socialism. It is an authoritarian system where all economic and political power rest in the hands of a central government.

East Germany as an example of a communist society

• East Germany arose out of the defeated Nazi Germany of World War 2.

• In 1945, the Allied powers divided up Germany into four sections. The sections controlled by the USA, Great Britain, and France combined to form West Germany, a free-market democracy.

• The section controlled by the USSR became East Germany, a communist state.

• Looking at a divided society like East & West Germany is an interesting way to examine how competing philosophies of democracy and communism worked out.

• In the end, it didn’t work out. On the 9th of November, 1989, protests forced the end of the East German government. East and West Germany were reunited in 1990 as a free-market democracy.

East Germany as an example of a communist society

• SED = Sozialistische Einheitspartei Deutschlands (Socialist Unity Party of Germany)

• GDR / DDR = German Democratic Republic / Deutsche Demokratische Republik (East Germany)

Group Reading and Presentations

• Assignment: – Prepare a brief presentation to the class how life

in East Germany reflects the ideals of a centrally planned economy.

– Contrast the East German lifestyle with that of a free-market economy.

– What are both the benefits and disadvantages of the East German lifestyle?

Group Research and Presentations

• “The dream of full employment” + “planned economy without a plan”

• “Sold-out” + “State Owned Product Worlds”

• “Home sweet home”

• “Sibylle fashion dreams”

Chapter 2 Homework Review

• Page 27– 2: Each system answers production and distribution

questions differently– 6: Military and a decent quality of living for its

citizens– 7: • Traditional values custom• Market values individual freedom and growth• Central values economic equity & security• Mixed values economic freedom and limits on gov’t

Chapter 2 Homework Review

• Page 32– 6: Combination of self-interest and competition

would lead to an economy offering desirable products at reasonable prices

– 8: Economic equity is difficult to achieve in a free market economy because not every person functions in the market with the same skills and abilities & therefore differences in compensation arise.

Chapter 2 Homework Review

• Page 38– 1: In both socialist and communist nations, the

gov’t often owns major industries. But socialism is achieved peacefully through democracy. Communist gov’ts control both political and economic power; they are authoritarian.

– 5: Centrally planned economies eliminate competition, giving businesses no incentive to produce goods of high quality. Also the bureaucracy is slow to respond to consumer wants/needs.

Chapter 2 Homework Review

• Page 44– 1: Laissez-faire is the doctrine that states that

gov’t should not intervene in the marketplace– 4: Your answer should discuss individual vs gov’t

role in the marketplace.