Adam Smith is a hallowed name in economic circles. His belief in a free market and his conviction of the invisible hand keeping the economy going was gospel for economists for over a century. Smith’s ideas are contained within the economic system known as Capitalism. In a Capitalist system the economy runs without government interference, and the basic laws of economics (supply and demand for example) are the rule of the land. While most governments today do play a role in their own nations economy, Smith’s beliefs are still widely ascribed to today. So to better understand the core principles of Capitalism we need to look at some of its most basic principles applied in different ways.
Part 1 of 1: Oftentimes it is difficult to step outside our own beliefs and look at our culture, society or economic systems objectively. The United States is capitalist, mostly. As Americans we find it hard to understand why anyone would choose any other economic system. Read over the situations below and determine whether or not you approve of the transaction. Then determine whether or not this transaction should be prohibited by the government. Keep in mind each transaction is done between consenting adults who are aware or believe they are aware of what each transaction entails.
- Your personal opinion, do you approve or disapprove of the transaction?
- Should the transaction be prohibited, why or why not?
Transaction A: A very complicated medical procedure has been discovered which cures cancer in patients who would otherwise almost certainly die. Staff shortages make it impossible to treat all those who would benefit, and the hospital has established a policy that the procedure will be made available on a first-come, first-serve basis. A wealthy patient who is last on the waiting list offers to pay a million dollars and all future medical expenses to a poor patient on the top of the list; in return, the two will exchange places and the well-to-do patient will get the treatment while the other almost certainly will not get it. If the poor patient dies (which is very likely) the money will be inherited by her children. The poor patient voluntarily agrees to the transaction.
Transaction B: Tired of making choices all the time, a person decides to sell himself to another person, receiving a large sum of money and promising to obey the new owner, who promises not to mistreat the slave.
Transaction C: Having considered alternative jobs (their wages, working conditions, availability, etc.), a woman selects prostitution as her occupation, taking all possible measures to safeguard her own health and that of her sexual partners.
Transaction D: You are waiting in line to buy tickets to a movie that is just about sold out. Someone from the back of the line approaches the person in front of you and offers to pay her $25 to exchange places in line.
Transaction E: A politically apathetic person who never votes agrees to vote for a particular candidate in return for a sum of money.
Transaction F: Wealthy parents who give birth to a child with a minor birth defect sell their child to another wealthy but childless family and buy a “perfect” newborn child from a family badly in need of cash