RSM100Y1 Lecture Notes - Lecture 1: Market Price, Economic Planning, Capitalism
Document Summary
Foundation for capitalism, free enterprise, free trade, wealth creation. Capitalism is a legal framework, not an ideology or way of living. Can vary from country to country, depending on different laws and extent of enforcement. Society benefits from lower prices as long as competition restrains self-interest. However, self-interest have natural tendency towards collusion and corruption. Capitalists in pursuit of self-interest promote public policies that benefit themselves at expense of public. Mercantilist policies unsound because they promote interests of merchants. Barriers to free trade (tariffs, subsidies, state-chartered monopolies, artificially raised prices) Unbridled capitalism results in concentrations of wealth and power. Optimal allocation of capital and labor in economy. Stifled economic creativity due to corruption and incompetence. Rich get richer, but poor also get richer as nation gets wealthier. Wealth is increase of revenue and stock (animals owned) Laborers should be paid more as nation gets wealthier. Wealth of nation determined by prosperity of consumers.
