1. Liberals and Conservatives have very different approaches to analyzing and forming understandings of how the market and government should operate within a society. While they both defend the capitalist business system they have varying levels of faith in the ability of these institutions ability to deliver rising social welfare in general. a. Contrast the basic philosophical principles of Conservative specifically the role of individuals, free markets and competition play in promoting the prosperity of the economy with the Liberal notion of how uncertainty in economic decision making can lead to herd behavior and instability.
b. Given the above answer how do Conservatives and Liberals differ with respect to the role government should play in the markets and national economy?
A/B) The Conservatives generally focus on the idea of a “Laissez Faire” government meaning that there is little to no government intervention and the market can run its course freely. Conservatives focus on the “Self Correcting Mechanism” by which any economic change whether it is recessionary or expansionary can be naturally fixed by the market.
In a free market, individuals are subject to pay the market price of a good or service at the businesses (Suppliers) discretion following the laws of Supply and Demand. This also goes for correcting the economy as a whole, in times of a Recession; eventually the market will grow on its own. During a time Economic Growth, the economy will naturally slow so the market does not grow too fast. Conservatives also argue that in a free market system, there is greater competition. Competition will cause businesses to be better and allow for creative destruction of businesses that are not efficient. On the contrary,
A/B) Liberals focus on more government intervention and argue that it is up to the government to protect the individuals (Consumers) from unfair businesses (Suppliers). Liberals also note that the free market is too unstable to stand-alone and without government spending the economy will grow too quickly and collapse or the country will enter into a deep recession for a long time. Liberals believe that if a Free Market is left to act on its own, big business will force out small competition and lead to Monopolies or Oligopolies in certain markets which will allow the elite to
charge whatever they want and their will be no substitutes for the good and individuals will be forced to pay the high prices they charge.
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