Class notes
Lecture #4 - Classical & Managerial Capitalism
Classical Capitalism vs. Modern Managerial Capitalism in the three dimensions of a profitable insitution: firms, workers, and markets PLUS Private Property.
[Show more]
Connected book
Book Title:
Author(s):
- Edition:
- ISBN:
- Edition:
Seller
Follow
Content preview
Classical Capitalism vs. Modern CapitalismThree dimensions
(0) Private Property
(1) Firms
(2) Workers
(3) Markets
Classical Capitalism (Adam Smith)
(1) Firms → size, number in a market, who owned?
- Numerous small firms in a market
- Individual or family owned
- Owners had unlimited liabilities in the event of bankruptcy
(2) Wage Workers
- Workers are supervised and commanded by an individual capitalist or an entrepreneur
family → a very simple hierarchy
- No regulations on children and women’s labor conditions
- Long labor hours
(3) Markets
- Competitive
- Single or few firms cannot change market prices
Similarities Between Classical & Today’s Capitalism
What are the common constituting elements both in Adam Smith’s capitalism and
in today’s capitalism?
Capitalism = an economic system as a specific combination of private property,
markets, and firms
(1) Private ownership of capital goods
(2) Purchasing the labor power of wage workers through the market
(3) Market exchanges of the output of production for monetary profit
(4) Profit-seeking of the firm as its business objective
, Classical Capitalism vs. Modern Capitalism
(1) Evolution of Firms
- a. Single individual or family owned→ Corporations are owned by a multitude of
individuals who hold shares (cronies→ shareholders)
- b. Numerous small-scale firms→ Large corporations
- c. Owners operated their firms by themselves→ Separation of the ownership of the
enterprise and control of its operations
- d. Owners had unlimited liabilities if bankrupted→ Now shareholders have only limited
liabilities
(2) Workers
a. Homogeneous workers commanded by few capitalists → emergence of various
salaried managers and trade union
b. No regulation on children and women's labor → Strong regulation on children and
women + dominance of male workers in workplace
c. Long working hours & low wage → efficiency wage (pay higher wages to skilled
workers to hold them longer)
(3) Markets
a. Activities of numerous small firms were subject to market and price mechanisms.
Market competition was intense, and market had a pricing power over firms → Markets
are populated by large firms & market price is substantially affected by few firms
b. Localized markets with a limited range of manufactured goods → National & global
markets with a various range of goods and services
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller alexperez. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $7.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
53340 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now