chapter 9 the invisible hand

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1、30PartI:VarietiesofCapitalismChapter2LiberalMarketCapitalism(latestrevision2009)InPartI,wewillconsidertheliberalmarketeconomyandthesocialmarketeconomy.Theliberalmarketeconomy,orfreemarketeconomy,ismostassociatedwiththeUnitedStatesandGreatBritain.ButitisalsofoundinCanad

2、a,Australia,NewZealand,andIreland.ThesocialmarketeconomyisfoundmostlyontheEuropeancontinent.Buttherearevariationswithinthesocialmarketeconomy;thesocialmarketeconomiesofScandinaviaaredifferentfromthesocialmarketeconomiesofFranceandItaly.Thischapterwillexaminethetheoryof

3、theliberalmarketeconomy.“Liberal”isfromtheLatinwordfor“free”.(Donotconfusethiswithpoliticalliberals.)Economistshavebothstudiedandappreciatedliberalmarketeconomiessincethe18thcentury.The“father”ofthetheoryofthemarketeconomyisAdamSmith,aScottishphilosopherwholivedmainlyi

4、nthelate18thcentury.Hismostimportantworkwaspublishedin1776.Theviewshepropoundedhavebeenenhancedbyalargenumberofpeopleovermorethantwocenturiesandareheldinsomeformbythemajorityofeconomiststoday.Throughoutthiscourse,wewillbeconsideringtheshifttogreateruseoffreemarketsinmo

5、stcountriesoftheworld.Theideasofthischapterareamajorreasonforthisimportantshift.1.ValuesofaLiberalMarketEconomyLetusbeginbyconsideringthevaluesinherentinaliberalmarketeconomy.Whetheryouagreeordisagreewiththesevaluesgreatlydeterminesyoursupportoroppositiontoaliberalmark

6、eteconomy.Thefirstvalueinthetheoryofaliberalmarketeconomyistheassumptionaboutthenatureofpeople.Thistypeofpersonhasbeencalled“EconomicMan”.Thiswasmentionedinthepreviouschapter.Peopleareassumedtoactasrational,self-interested,maximizers.Consumersattempttomaximizethesatisf

7、actiontheygetfromtheirpurchases,giventheirlimitedincomes.Businessesattempttomaximizetheirprofits.Workersattempttomaximizetheirwagesorotherbenefitsofajob.Asecondvalueofaliberalmarketeconomyisindividualism.Theindividualisseenasthecenterofsociety.Thefunctionofgovernmentis

8、toservetheindividual.OneprominenteconomistwhosupportedtheliberalmarketeconomyarguedthatPresidentJohnKennedy’scallto“a