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Economics: Historical Perspectives

detailed explanation on this aspect of economics, see the others. In a market system, anyone can buy land or sell it
discussion of supply and demand. of his or her own free will or produce products and/or
services that are sold at a market price. In earlier societies,
participants responded not to the demands of the market-
SUMMARY
place but to the demands of tradition or law as well as the
Economics is a complex topic that is studied constantly
and thoroughly. This article has given an overview of some threat and fear of punishment.
of the main tenets of economics; however, there is much The factors of production, key to a capitalistic sys-
that was not even introduced. There are other topics tem, are the result of historical changes that made labor a
throughout this encyclopedia, such as macroeconomics key to creating wealth, made real estate out of land that
and microeconomics, that will further define and expand had been in families for generations, and made capital out
the topic of economics. of possessions. Capitalism, a free-market system, was the
cause of much unrest and insecurity, but it also gave birth
SEE ALSO Business Cycle; Careers in Economics; Econom-
to progress and, ultimately, fulfillment. There have been
ics: Historical Perspectives; Ethics in Economics;
several key individuals whose work and economic writing
Macroeconomics/Microeconomics
help to clarify current thought about economic systems.
The ideas of four are presented here.
BIBLIOGRAPHY
Dolan, Edwin G., and Lindsey, David E. (1994). Economics (7th
ed.). Fort Worth: Dryden Press. ADAM SMITH (1723–1790)
Perhaps the best known and one of the most revered econ-
Heilbroner, Robert L., and Thurow, Lester C. (1998). Economics
Explained. New York: Simon & Schuster. omists, Adam Smith wrote The Wealth of Nations in 1776,
Lipsey, Richard G., Steiner, Peter O., Purvis, Douglas D., and the same year the Declaration of Independence was
Courant, Paul N. (1993). Economics. New York: Harper- signed. In this famous work, Smith explained how an
Collins College Publishers. independent society works. He answered several questions
McEachern, William A. (2006). Economics: A Contemporary that people had at the time regarding the concepts of a
Introduction. Mason, OH: Thomson/South-Western. free-market system.
Of primary concern was the question of how those
consumed with greed might be controlled so they would
Roger L. Luft
not take over society. Smith introduced the concept of
competition. Anyone bent on bettering only him- or her-
self with no regard for others will be confronted by others
ECONOMICS: with the same goals. In this new system, those who are
buying or selling are forced to meet the prices offered by
HISTORICAL
competitors.
PERSPECTIVES Smith also illustrated that a market system also has
Economics has been around since the beginning of time, another important function. That function is to produce
but the study of economics dates back only a few hundred goods and services that society wants, and in quantities
years. Since the beginning of human history, people have that society wants. A good example of this is when prod-
had to confront the problem of scarce resources and ucts such as Hula Hoops, Cabbage Patch dolls, or Beanie
unlimited wants. The study of economics will continue Babies became the rage, there were not enough being pro-
until the end of time because each day uncovers new evi- duced to satisfy all the potential buyers. As a result, the
dence that supports or revolutionizes economic theory. manufacturers had to increase production and were also
able to increase prices because the demand for the prod-
THE DEVELOPMENT OF ucts was so great and buyers were willing to pay higher
ECONOMIC SYSTEMS prices. In fact, many buyers bought quantities they did
The United States has a capitalistic economic system. not need precisely so they could, in turn, sell the high-
Sometimes this system is called the free-enterprise system demand products to others who were willing to pay the
because that term is more acceptable to certain individu- higher price. That is the capitalistic market system.
als. A capitalistic system includes a market society, or mar- Smith was extremely visionary and foresaw that if a
ket system—a system of mercantilism in which free market is to grow and prosper, there must be little
participants react freely to the opportunities and chal- government intervention. He saw that a free market must
lenges of the marketplace. This is in contrast to systems in be self-regulating in order to become wealthy and robust.
which participants follow tradition or the commands of He made it clear that it was truly individuals’ greed and

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