Capitalism• By 1750, British society moved further away from

regulation of trade toward the free market of capitalism

• Capitalism = system of production, distribution and exchange in which accumulated wealth is invested by private owners for the sake of gain

Example• Wealthy landlords decide to raise sheep instead of

crops because wool is profitable• They are not concerned with the common good

(or need of the people), they want to make $$• They own the sheep and choose to whom they will

sell the wool and how much they will sell it for• If there is more demand for the wool, they could

charge a higher price• If no one wants to buy the wool, they would

probably lower the price

• Capitalist systems are defined by – Free competition– Open market– Private ownership – Private businesses competing for profit– Workers are generally paid wages and are free to

compete for jobs• Control over the economy lies with the

private, rather than governmental sector– Pure capitalism implies no governmental control

Adam Smith

• 16th century Scottish economist– Wrote “Wealth of Nations”– Believed that governments should keep their

“hands off” the economy “laissez-faire”– Believed that when the market (production and

consumption) are free to respond to the laws of supply and demand, economies will be more productive

– Considered the father of modern economics