Economics is the study of how a society produces

and distributes resources. You probably know that

our economic system is called capitalism and that

a competing economic system, communism, lost

out to capitalism in a decades-long military,

political and ideological (ideas-based) conflict

known as the Cold War. This reading will explain

the basic economic and ideological foundations

of capitalism. You will use this information in

class as you analyze media messages that support

and criticize capitalism.

Capitalism is an economic system based on the

private ownership of goods and services.

Capitalist economies, also called “free market”

economies, empower individuals and private

businesses to decide most economic matters. This

includes what things to make and sell, how much

they cost, how to use resources and where to live

and work. This system of “private enterprise” has

been credited with unleashing human freedom

and creating extraordinary wealth through

individual initiative. Capitalism has also been

credited with exploiting and oppressing

humanity, spreading inequality, starting wars, and

propelling the wholesale destruction of the global

environment. In order for you to weigh in on this

debate you need to understand some basics about

The Scottish economist, Adam Smith, developed

an influential theory of capitalism. He published

his most famous book, The Wealth of Nations, in

1776, at the time of the American Revolution.

Smith