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Lecture Basic microeconomics - Chapter 2 Appendix: The history of economic systems

Chapter 2 Appendix: The history of economic systems. In this chapter, the following content will be discussed: Laugher curve, evolving economic systems, the need for coordination in an economic system, evolutionary changes within systems, a blurring of the distinction between capitalism and socialism,. | The History of Economic Systems Chapter 2 Appendix Laugher curve Socialism is the longest path from capitalism to capitalism. Evolving Economic Systems Capitalism and socialism have not existed forever. Capitalism came into widespread existence in the mid-1700s; socialism came into existence in the early 1900s. Evolving Economic Systems Before capitalism and socialism other forms of economic systems existed: Feudalism dominated the Western world from about the 8th to the 15th century. Feudalism is an economic system in which traditions rule. Evolving Economic Systems Feudalism gave way to mercantilism. Mercantilism is an economic system in which government determines the what, how, and for whom decisions by doling out the rights to undertake certain economic activities. Evolving Economic Systems Mercantilism remained the dominant economic system until the Industrial Revolution. Industrial revolution – a time when technology and machines rapidly modernized industrial production and mass produced goods replaced handmade goods. Evolving Economic Systems Capitalism evolved from the Industrial Revolution in 1700s. Industrial revolution led to a decrease in power of small producers and increase in power of capitalists. The Need for Coordination in an Economic System Every economic system needs coordination. In his 1776 classic, Wealth of Nations, Adam Smith argued that markets could coordinate the economy without the active involvement of government. The Need for Coordination in an Economic System Markets coordinate economic activity by using the price mechanism to direct individuals' self-interest into society's interest. Evolutionary Changes Within Systems Both capitalism and socialism are constantly evolving with changes in social customs, political forces, and the strength of markets. Evolutionary Changes Within Systems Capitalism evolved into welfare capitalism—an economic system in which the market operates but government regulates markets significantly. . | The History of Economic Systems Chapter 2 Appendix Laugher curve Socialism is the longest path from capitalism to capitalism. Evolving Economic Systems Capitalism and socialism have not existed forever. Capitalism came into widespread existence in the mid-1700s; socialism came into existence in the early 1900s. Evolving Economic Systems Before capitalism and socialism other forms of economic systems existed: Feudalism dominated the Western world from about the 8th to the 15th century. Feudalism is an economic system in which traditions rule. Evolving Economic Systems Feudalism gave way to mercantilism. Mercantilism is an economic system in which government determines the what, how, and for whom decisions by doling out the rights to undertake certain economic activities. Evolving Economic Systems Mercantilism remained the dominant economic system until the Industrial Revolution. Industrial revolution – a time when technology and machines rapidly modernized industrial production and .