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Economic Systems. Coach Grgurich Unit 6. Adam Smith.

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economic systems

Economic Systems

Coach Grgurich

Unit 6

adam smith
Adam Smith

In 1776 Adam Smith publishes his book Inquiry into the Nature and Causes of the Wealth of Nations,usually referred to simply as The Wealth of Nations.  In his book, Smith describes the free enterprise system.  He expresses the idea that there are two laws of economics that regulate all economic activity – the law of supply and demand and the law of competition.  Smith advocates governments staying out of the operation of business.  Government policies that reflect his ideas are considered “laissez-faire” – French for “let do” which meant leaving things alone.


The Industrial Revolution produced great wealth but it was unevenly distributed.  The rich got very rich while working class families found it difficult to provide for their basic needs.  There are economists during this time who call for a new organization to society in light of new labor needs.  Robert Owen and others advocate a mixed system of individual choice and government control today called “socialism.”  Socialism calls for public ownership of the major means of production while government acts to guarantee wages that would meet the needs of working families.

robert owen
Robert Owen

A foremost socialist in England is Robert Owen, a successful business owner. As a factory owner, Owen felt it was his responsibility to pay good wages to his workers and create a community that would protect the needs of individuals.  He wrote in 1833 about his ideas in Foundation Axioms of "Society for Promoting National Regeneration.”


In 1848 Karl Marx outlines his economic ideas in the Communist Manifesto.  Marx believes that the basis of all wealth is labor, the workers, instead of business owners.  He advocates large-scale government control of business and government planning to direct the economy. He wrote that the workers should own the all the means of production, including factories, businesses, and even private property.  He advocated the overthrow of the bourgeoisie (middle class) by the proletariat (working class) to establish a new society with the needs of labors at the center.