Classroom Activity - Lesson 1, Part 2

Will the Real Capitalism Please Stand Up?

Will the Real Capitalism . . .?”download .doc file

Lesson Overview

The traditional, “comparative systems” approach to categorizing national economies proves less than useful in a world of mixed economies. No nation has a pure market economy and none has a pure command economy. Instead of trying to fit messy reality into conveniently labeled packages, it makes more sense to describe economies in terms of a continuum, from those with a preponderance of strong capitalist institutions to those with few or none. In this exercise, students analyze descriptions from five different countries to determine which institutional components of capitalism are present and, if so, to what extent. Students then place each on a continuum depending upon the number and strength of its capitalist institutions.

Video Demonstration

Concepts

  • markets
  • rule of law
  • capitalism
  • property rights
  • entrepreneurship
  • institutions

Content Standards

Standard 3: Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.

  • There are essential differences between a market economy, in which allocations result from individuals making decisions as buyers and sellers, and a command economy, in which resources are allocated according to central authority.
  • National economies vary in the extent to which they rely on government directives (central planning) and signals from private markets to allocate scarce goods, services, and productive resources.

Standard 10: Institutions evolve in market economies to help individuals and groups accomplish their goals. . . . A different kind of institution, clearly defined and well-enforced property rights, is essential to a market economy.

Standard 16: There is an economic role for government to play in a market economy whenever the benefits of a government policy outweigh its costs. Governments often provide for national defense, address environmental concerns, define and protect property rights, and attempt to make markets more competitive. Most government policies also redistribute income.

Materials:

(Page numbers refer to download file, linked above)

  • Copies or overhead transparency of U.S. description, pp. 4-5 (or use updated description below)
  • Copies of chart, p. 18 (one per participant)
  • Copies of country descriptions: pp. 4-16 or use updated descriptions available in the table below. (Number of copies depends on whether each discussion group will be discussing one country or all 5)
    • When making copies, note that each country description is paired with the blank analysis form (p. 18)
  • visuals, pp. 4, 5, 6, 18
  • Updated country descriptions & scenarios (2012)

SAMPLE: United States of America

Time:

  • 1-1.5 class periods

Procedures

Reading-based Strategy

  1. Discuss with students the definition of “institutions” and engage them in identifying common institutions in their daily lives:
    • Institutions are the established behavior practices and patterns that form the foundation for community life.(An example for students to consider is education. Have them list “established practices and patterns” such as going to a school building, one teacher in a classroom of students, homework, public schooling paid for by government, the persistence of the summer vacation model even though few work in agriculture, etc.)
  2. Introduce or review with students the 4 key institutions of capitalism: markets, private property, the rule of law, and entrepreneurship. (See teacher background outline for Lesson 1, Part 2: What is Capitalism?) Important points to review or emphasize:
    • Markets: A market exists where-, when-, and however buyers and sellers interact to exchange goods, services, or resources. However, not everything we might refer to in everyday conversation as a “market” meets the criteria for the economic definition of the term.
      • Competitive markets are based on voluntary exchange. Exchanges that exploit people who do not participate voluntarily – selling slave labor, for example – do not fit our definition of a competitive market. Likewise, the illegal drug trade, in which violence is commonly used to force involuntary exchange, is not a market in the economic sense.
      • Markets are also characterized by flexible prices that change in response to changes in supply and demand. It is important to remember that “price tags” are not always “market prices.” Prices in state stores in the former Soviet Union or in North Korea today are administered prices rather than market prices. Market prices emerge from the un-orchestrated interaction of supply and demand; administered prices are generated by government officials.
    • Private property: Property rights are the rights of people to themselves (including the value of their labor), and their possessions.
    • Rule of law: Societies may have laws, stable governments, and even benevolent rulers, and still be without the rule of law. The key requirement of the rule of law is that both the governed and the governors are subject to the law.
    • Entrepreneurship: Not all business people are entrepreneurs. Entrepreneurs are motivated by profit to assume the risk of production. One important tool in this endeavor is innovation.
  3. Distribute copies of the “United States” handout and chart (or display the overhead transparencies). Explain the chart, pointing out what students will be looking for in the reading. Demonstrate the activity by reading through the U.S. example and filling in the chart in response to students’ suggestions.
  4. Divide the class into 5 discussion groups. Distribute handouts so that each group has one of the 5 remaining country descriptions: Peru, Uganda, Indonesia, Czech Republic, or Eqypt. Also distribute copies of the chart. Instruct students to read their group’s country description individually. Then, discuss the scenario with group members and fill in the chart. Use information from the reading to reach consensus on whether the listed institutions are present or absent and to what degree. After completing the chart, the group must decide where to place their country on the continuum (both the continuum at the bottom of the chart handout, and the class copy posted on the wall or on an overhead transparency). Remind students that the data on the U.S. handout may provide helpful comparisons.Alternate procedure: Give each discussion group all 5 country descriptions. Instruct them to fill out all 5 charts and to place all 5 countries on the continuum.
    • Depending on students’ reading skills, teachers may find it valuable to reconvene the class after groups have completed the first country scenario to assess students’ success in interpreting the descriptions and filling out the chart. If students continue to struggle with the activity, debrief each scenario separately instead of allowing the small groups to complete all the remaining scenarios on their own.
  5. Reconvene the full class. Using the overhead transparency of page 18, conduct a discussion in which students must reach consensus on the placement of all countries.
  6. Optional Extension: Using the sources listed below for the web-based strategy, add nations that are featured in other lessons in the unit – India, China, Brazil, Kenya, etc. – either by writing additional scenarios or by assigning student groups to research the various countries. Check links in Materials (above) for additional and updated country scenarios.
  7. Suggested debriefing question:
    How has your understanding of the label “capitalist” changed as a result of this exercise? (The desirable outcome is that students understand “capitalist” as the description of a set of institutions rather than a definitive label for a country’s economic system. They should recognize that there is a range of capitalist practice and that “capitalist” institutions are rarely present in their purest form. This will set the stage for later lessons in which students investigate how those institutions can be shaped to work to advantage or disadvantage poor people in different parts of the world.)

Web-based Strategy Instead of giving students the scenario handouts, give them only copies of the chart and continuum, and a list of countries. Make students responsible for researching the data necessary to complete the charts and place the countries on the continuum.  Set up web page with starting links.  See list of suggestions below.  (Not linked here because of annual url changes for specific data, but easily found with any web browser.)

  • World Bank Governance Indicators
  • The CIA World FactBook
  • The Economist.com Country Briefings
  • Index of Economic Freedom (Heritage Foundation)
  • Free the World.com  (Fraser Foundation)
  • Transparency International’s Corruption Perceptions Index:
  • Country Reports – Economic Policy and Trade Practices (U.S. State Department):
  • Freedom House country rankings
  • Nationmaster
  • Gapminder
  • Ease of Doing Business country rankings