Unit 1: Economics and Globalization

Lesson 2a: Economic Systems and Globalization

Introduction

 

Because of scarcity we must make choices. An "economic system" is the way that societies make economic choices. Because of scarcity all countries must decide (1) what to produce, (2) how to produce, and (3) who get what is being produced. Economic systems answer these fundamental questions.

All over the world economies are undergoing a process that I like to call "structural adjustment", but it is more commonly called "globalization". That is, countries are moving away from a command economy with government central planning to a laissez-faire market economy or capitalism. In this process the economic role of government is decreasing all over the world (well, almost).

In order to understand why this is happening we have to study unit 1, chapters 1, 2, 3 and 20, which are really MICROeconomic chapters. Strangely our Tomlinson videos do not discuss in depth the characteristics of market economies but our textbook does (chapter 2). Our textbook does not spend much time discussing command economies (planned economies), or economies in transition from planned to market (from command to capitalism), but the video lectures do!

When studying chapter 2, both the textbook and the videos, try to understand the following: (1) What are the characteristics of market and command economies? (2) What are their benefits and problems? and, (3) Why are countries moving away from a command economy toward a market economy?

In lesson 2a we will examine those questions. Then, in lesson 2b, we will look at what the role of government should play in a market economy. All over the world the economic role of government is decreasing, but it is not disappearing. So, what IS the economic role of government in market economies?

 

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Lesson 2a