Will the Real

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Classroom Activity Lesson 1 Defining Terms
Will the Real Capitalism Please Stand Up ?
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Capitalism is identified by its characteristic
institutions
Institutions the formal and informal rules of
the game that shape incentives and outline
expected and acceptable forms of behavior in
social interaction.

• Private Property Rights
• Rule of law
• Open, competitive markets
• Entrepreneurship and innovation

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ECONOMIC ANALYSIS clearly present the component
is present in the economy with few
exceptions generally present the component is
present in the economy, but with many or
significant exceptions generally absent the
component is only present in the economy in some
limited forms clearly absent the component is
almost entirely excluded from the economy not
enough information
Present ? Evidence?
markets
private property
rule of law
entrepreneurship
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United States

• With a population of 310m, the US has the largest
  and most technologically powerful economy in the
  world, with a GDP of 14.6t and per capita GDP of
  48,500. US business firms enjoy greater
  flexibility than their counterparts in Western
  Europe and Japan in decisions to expand capital
  plant, lay off surplus workers, and develop new
  products. At the same time, they face higher
  barriers to enter their rivals' home markets than
  foreign firms face entering US markets. US firms
  are at or near the forefront in technological
  advances, and consistently rank in the top three
  countries in the world for patent applications,
  along with China and Japan.
• The economic downturn of 2008 has seen economic
  growth slow to 2.8 in 2010, un-employment rise
  to 9 nationally (103rd in the world), government
  spending as a percentage of GDP increase to 42.2
  and gross public debt surpass 100 of GDP.

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United States

• The judiciary functions independently and
  predictably although serious constitutional
  questions have arisen regarding the government
  mandated health insurance decision.
• Corruption and cronyism is on the increase and is
  undermining the institutional integrity of the
  rule of law, resulting in an 86th percentile
  ranking in control of corruption and a corruption
  perception index of 7.1 (out of 10) by
  Transparency International and a decrease of 4
  points in the heritage Foundation score to 71
  from a previous 75 in 2010.
• Property rights are guaranteed, although affected
  by increasing regulations, ranking the US 19th in
  the world, with a score of 85 out of 100 by the
  Heritage Fndn.

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Specific Situation Apple Patent Victory
Aug. 25, 2012 SAN JOSE, Calif.Nine jurors
delivered a sweeping victory to Apple Inc. in a
high-stakes court battle against Samsung
Electronics Co., awarding the Silicon Valley
company 1.05 billion in damages and providing
ammunition for more legal attacks on its
mobile-device rivals. Jurors Friday found that
Samsung infringed all but one of the seven
patents at issue in the casea patent covering
the physical design of the iPad. They found all
seven of Apple's patents validdespite Samsung's
attempts to have them thrown out. They also
decided Apple didn't violate any of the five
patents Samsung asserted in the case.
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ECONOMIC ANALYSIS clearly present the component
is present in the economy with few
exceptions generally present the component is
present in the economy, but with many or
significant exceptions generally absent the
component is only present in the economy in some
limited forms clearly absent the component is
almost entirely excluded from the economy not
enough information
Present ? Evidence?
markets
private property
rule of law
entrepreneurship
Prices and products determined in markets
clearly present
clearly present
Patents upheld
Courts act and decisions are enforced
clearly present
Millions of companies operate in every sector
clearly present
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Capitalism is best thought of not as a system,
but as a continuum of institutional combinations
. . . .
Some institutional forms confer benefits on the
poor . . . and others do NOT.
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Fraser Institute Index of Economic Freedom 2009
2007 data
Malaysia
Czech Rep.
Jordan
Note scale change
Canada
Egypt
Chile
Ireland
Uganda


10 9 8
7 6
5
India
Peru
Russia
Belize
Israel
Poland
Indonesia
Finland
Hong Kong
Venezuela
Most Free Hong Kong 8.9
Least Free Zimbabwe 2.9

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Fraser Institute Index of Economic Freedom 2012
2010 data
Uganda
USA
Malaysia
Czech Rep.
Jordan
Egypt
Note scale change
Israel
Chile
Ireland
Canada


10 9 8
7 6
5
India
Peru
Russia
Belize
Poland
Finland
Hong Kong
Venezuela
Indonesia
Most Free Hong Kong 8.9 Least
Free Venezuela 4.07

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2012 Rankings (Out of 144)

• Hong Kong 1
• Singapore 2
• NZ 3
• Switzerland 4
• Australia 5
• Canada 6
• Bahrain 7
• Mauritius 8
• Finland 9
• Chile 10
• United Kingdom 12
• Ireland 12
• U.S. 18 (down from 3 in 2006)
• Japan 20
• Poland 48 (88 in 1990)

• Uganda 50 (67 in 2010, 51 in 2001, 113/113 in
  1990)
• Jordan 62 (42 in 2010)
• Greece 81
• Mexico 91 (69 in 2010)
• Egypt 99 (from high of 46, 80 in 2010)
• Israel 52 (44 in 2007, 83 in 2011)
• Russia 95
• China 107 (82 in 2010)
• India 111
• Iran 111
• Zimbabwe 142
• Myanmar 143
• Venezuela 144

2010 data
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Becoming more free which institutions?
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Becoming less free which institutions?