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Capitalism

Capitalism. TU 124. Industrial Revolution. Overview Revolutionary because it changed-revolutionized-the productive capacity Not just a change in sources of power animate/water to steam but the innovation of production method also

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Capitalism

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  1. Capitalism TU 124

  2. Industrial Revolution • Overview • Revolutionary because it changed-revolutionized-the productive capacity • Not just a change in sources of power animate/water to steam but the innovation of production method also • No one was left unaffected nobles, merchant, artisan, peasant and also work forces • Serve as a key to the origin of modern western society

  3. Industrial Revolution • Causes • Agricultural revolution (1)uses of fertilizer, new crops and framing technologies, (2) uses less labor to produce the same or more outputs and (3) releases excess labor to industrial sector • Technology revolution as steam engine came to replace water or labor as a main source of power in production process, location is not a factor to concern anymore

  4. Industrial Revolution • Effects • Division of Labor-Mass Production => need more inputs and market for outputs • Laissez Faire (opp. Socialist)=> hand off or without government interference • New Social Structure/Class => Entrepreneur or new middle class came to replace merchant • Personal Liberty and Property, as a necessary condition, needs to be secured in order to accumulate capital

  5. Economics and Capitalism • Economics arise from the greedy nature of human, but humans are also rationale • Benefits from interaction between mankind is ‘trade’ or markets their excess products since it creates a win-win solution to both sides, other creatures do not make ‘trade’ • Market is the most benefits mechanism to make society better

  6. Economics and Capitalism • Adam Smith has found that Market is the most efficiency mechanism in resources allocation under the assumption of greedy but rationale • Competitive, abundant in buyers and sellers-Market, is the most desirable form of Market since no one is able to dominate price in that Market

  7. Economics and Capitalism If you let the greedy and rationale or market mechanism work; • Technology and division of labor will reduce cost of production on supply side • People in society can gain more by produce according to their expertise, no need to produce all necessaries by themselves and trade what they do not have with what they have • Therefore, society will be better off or increased in welfare from (1) cost reduction and (2) more variety of goods

  8. Economics and Capitalism Market mechanism • does not work when market has few sellers or buyers (monopoly) • does not work if personal liberty and property do not exist or protect, law and order are the minimum or necessities condition • works well for resources allocation only but does not work well for distribution or inequality

  9. Economics and Capitalism For distribution or inequality • Taxes or subsidies are the working tools to reach more distribution and/or better equality • Tax the rich to help the poor, needs no Robin Hood • Fee the ones who need special services e.g., toll ways and ordinary roads • Fine the wrong doer or Deposit as a gaurantee for the ones who have tendency to harm society • Subsidizes the ones who have good attention to society

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