Overview
This lecture explains the economy as a social institution, explores its historical revolutions and key economic models, and discusses how economic sectors and labor markets function in a modern, globalized context.
The Economy as a Social Institution
- The economy organizes all production, consumption, and trade of goods and services in society.
- Economic systems determine how resources are made, exchanged, and used (e.g., capitalism and socialism).
Economic Sectors
- The primary sector extracts raw materials (e.g., farming, mining).
- The secondary sector transforms raw materials into manufactured goods (e.g., oil refining).
- The tertiary sector provides services rather than goods (e.g., teaching, healthcare).
Economic Revolutions
- The agrarian revolution began with the domestication of plants and animals, leading to surpluses and population growth.
- The industrial revolution introduced factories, mass production, and wage labor, raising productivity and standards of living.
- The information revolution shifted economies from manufacturing to service and idea-based work, decreasing agricultural and manufacturing jobs.
Capitalism vs. Socialism
- Capitalism features private ownership, profit-seeking, and competition; goods are regulated by supply and demand ("Invisible Hand").
- Market failures, like monopolies, lead to government intervention in capitalist economies.
- Socialism places means of production under collective or government ownership, focusing on collective goals and needs.
- Communism is a theorized system of complete social and economic equality, but in practice led to concentrated political power.
Modern Labor Markets and Corporations
- The primary labor market offers high pay and benefits (e.g., doctors, engineers), while the secondary labor market has lower pay and security (e.g., retail workers).
- Most US jobs are now in the tertiary (service) sector.
- Corporations are legal entities separate from their members and increasingly operate globally.
Key Terms & Definitions
- Economy — system that organizes production, consumption, and trade in society.
- Primary sector — part of the economy extracting raw materials.
- Secondary sector — transforms raw materials into goods.
- Tertiary sector — provides services rather than goods.
- Capitalism — economic system with private ownership and profit-driven competition.
- Socialism — economic system with collective or government ownership of production.
- Market failure — inefficient allocation of goods/services in unregulated markets.
- Corporation — organization that exists as a separate legal entity from its members.
- Primary labor market — jobs with high pay and benefits.
- Secondary labor market — jobs with low pay and little job security.
Action Items / Next Steps
- Review examples of primary, secondary, and tertiary sector jobs.
- Understand differences between capitalism and socialism for potential essay questions.