Political Science 2211E Lecture Notes - Lecture 3: Economic Liberalism, Invisible Hand, Classical Liberalism

• School: Western University
• Department: Political Science
• Course: Political Science 2211E
• Professor: Joseph Lyons

Document Summary

Lecture 5 the liberal-neoliberal approach to economic policy. Classical economic liberalism: original free-market approach, decentralized economic decision-making by firms and consumers rather than by government, believed to be more efficient than centralized command economy. Adam smith father of classical economic liberalism. More demand than supply = prices rising: demand rises or supply falls. Price signals supply and demand determine prices prices then send signals to producers and consumers free markets react to change automatically price signals are the invisible hand". Intervention in the economy kept to an absolute minimum to let invisible hand work: government should protect private property, enforce contracts, provide national defence and not much else. Benefits of a free-market system: automatically coordinates supply and demand, stimulates innovation a. High unemployment too much supply of workers relative to demand lower wages cause employers to hire unemployment will automatically self-correct.