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Money, Business and Free Enterprise
Teacher's Student Activities
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Economics, Geography, and Social Science
- Students gain better understanding of money, business and entrepreneurship in real world.
- Students should deepen their understanding of the economic problems and institutions of the nation and world in which they live.
- Students to appreciate the role of the private sector, through investment and philanthropy, in improving society's quality of life.
- Students gain understanding of government's role/impact in creating and minimizing societal problems.
- Examine these guide materials.
- Have students complete the pre-program activities so they will be ready and able to participate in discussions regarding the program.
- Discuss the "Issue Question" and poll your students.
Students join Nobel Prize winning economist Milton Friedman, Sandra Kurtzig (founder of ASK Computer Systems), Elisabeth Claiborne Ortenberg and Arthur Ortenberg (co-founders of Liz Claiborne Inc.), Richard E. Rainwater (legendary Texas financial deal maker), and Stephen A. Wynn (CEO of Mirage Resorts, Inc., Las Vegas). This is a lively discussion of money, business, and entrepreneurship in a free economy.
MILTON FRIEDMAN, Ph.D.
Dr. Milton Friedman is a Senior Fellow at the Hoover Institution
at Stanford University in California. He was an economist for
nearly 40 years at the University of Chicago. He believed that
only the amount of money in existence, and not the manipulation of
it by government through taxes and expenditures, effects the level
of production in an economy. He rejected most of the widely
accepted theories of British economist John Maynard Keynes. Dr.
Friedman believed in a free laissez-faire capitalist economy with
minimal governmental interference and was therefore opposed to
tariffs, social welfare programs, corporate taxes, and wage and
price controls. He was an advisor to Senator Barry Goldwater and
Presidents Richard Nixon and Ronald Reagan. Dr. Friedman is the
recipient of the National Medal of Science, the Presidental Medal
of Freedom (America's highest civilian honor), nearly 20 honorary
degrees, and the Nobel Prize in Economics.
SANDRA L. KURTZIG
Sandra L. Kurtzig is the founder and retired chairman of ASK
Computer Systems in Los Altos, California. She earned degrees from
UCLA and Stanford in mathematics, chemistry, and aeronautical
engineering. Kurtzig later quit her job as the marketing
specialist to launch her own computer software business. Starting
with $2,000, and working out of a spare bedroom in her apartment,
she created the largest public company founded and run by a woman.
From these humble beginnings, Sandra Kurtzig built ASK into one of
the fastest-growing software companies in the United States, with
$400 million in annual sales.
ELISABETH CLAIBORNE ORTENBERG and ARTHUR ORTENBERG
Liz Claiborne and Arthur Ortenberg are the co-founders of Liz
Claiborne Inc., one of the largest apparel companies in the world.
This husband and wife team combine creative brilliance and
managerial innovation. Liz worked for 25 years as a fashion
designer; Arthur ran a textile company. In 1976, they started
their own apparel business with $50,000 in savings and some
investments from friends and family with the goal to "clothe the
American working woman." Their company had annual sales of $2.6
million the first year. Over the next 10 years, annual revenue
exploded to over $1 billion. Liz and Arthur retired from their
business in 1990 to commit their energies to wildlife and
conservation projects.
RICHARD E. RAINWATER
Richard Rainwater is a legendary financial dealmaker from Fort
Worth, Texas. The son of a wholesale grocer, he graduated from the
University of Texas with a degree in mathematics and earned his
MBA from Stanford. He landed a job as an investment banker, but
soon accepted an invitation from former Stanford classmate Sid
Bass to manage and diversify his family portfolio. Richard became
the chief financial architect for the Bass family investments,
which launched an incredible saga in American business history. He
was given $5 million to invest during his first year and managed
to lose it all, then sought an investment strategy and applied his
scientific mind to his quest. Richard became a "perpetual-motion
deal machine" and the "best-kept secret in high finance" as he
propelled the family fortune to more than $5 billion while
creating one of the great American dynasties of the 20th century.
In 1986 he launched his own business, investing in more than 30
companies and purchasing one million square feet of office space
in Texas. Richard Rainwater has been heralded as the "capitalist
cowboy for the '90s, leading the way into new frontiers of
finance."
STEPHEN A. WYNN
Stephen Wynn is Chairman and Chief Executive of Mirage Resorts
Inc. in Las Vegas, Nevada. He is a graduate of the University of
Pennsylvania who worked weekends at his father's bingo business on
the Maryland shore. Steve became one of the original investors in
the Frontier Hotel, which was sold to the legendary Howard Hughes.
At the age of 31, he gained control of the Golden Nugget and with
"boldness and innovation" transformed the property into Las Vegas'
most luxurious hotel and casino. Steve then built one of the most
spectacular and successful resorts in the world, The Mirage, a
$600 million, 67-acre tropical wonderland. This brilliant
entrepreneur recently completed construction of Treasure Island,
the Adventure Resort, which features a swashbuckling pirate theme
that stimulates the imagination of its guests.
Regardless of what curriculum you are teaching, your students will
benefit more from the program if they read the student handouts
and complete the pre-program activities. Discuss featured guests
and the reasons they are on the program.
Economics
The basic economic problem facing all individuals, groups, and
nations is the problem of scarcity. Scarcity results from the limited natural resources, such as water, land, and minerals, that are unavailable to produce the variety of goods and services that we need and want. Because of scarcity, choices must be made concerning how to utilize limited resources. The basic choices that producers in any economic system must make involve determining goods and services, and for whom to produce them.
It is necessary to understand the basic processes through which market economies function and growing network of markets and prices that reflect shifting supply and demand conditions in a market economy. The different economic systems (totally free market "laissez-faire" as opposed to a system totally under government command or some combination in between as found in the United States) employ different mechanisms through which they regulate the distribution of scarce resources in the production of desired goods and services.
The United States, which has somewhat of a free-market system, uses prices and levels of supply and demand in markets to answer these basic questions. Households, including individuals, demand the goods and services that give them the most satisfaction, given their income and the prices of these goods. Business firms try to maximize profits by supplying at the least cost the goods and services that households demand.
Businesses allocate factors of production based on the demand for the goods and services they produce. Economic efficiency requires that individuals and business firms specialize in the performance of particular tasks or the manufacture of particular goods and services and that they exchange their surpluses of goods for the goods they want to consume. Money was developed to facilitate this exchange. Thus, specialization, exchange, and money are the results of our interdependence, which, in turn, results in efficient production of the final goods and services of our economy.
Comparative Economic Systems
A market system is characterized by decentralized decision making
on the part of households and businesses. In this free enterprise
system, most of the goods and services are produced by the private
sector by firms owned and operated for profit. The decisions of
individuals influence market prices that reflect the preferences
of all participants and that act as signals to producers and as
rationing devices. Thus, to answer the basic economic questions,
decision makers in the market system rely primarily on the
preferences and choices of the members of the society.
These are alternatives to the free market system, such as
traditional and command economies, where decisions rely on
mechanisms other than the choices of the members of these
societism. No real world economy is a pure form of any of these
economies. Decentralized decision making in a market is most
evident in the economy of the United States, Canada, and Western
Europe, whereas elements of command economy are most evident in
what was the Soviet Union and socialistic countries such as
Sweden.
These different systems impact the social and political systems of
the societies in which they function. Each society has basic
economic goals; that is, freedom of choice, efficiency, equity,
full employment, price stability, growth, and security. It is
important to understand the existence of trade-offs among these
goals. It is important to develop analytical skills to assess
economic issues and proposed governmental policies in light of
these goals.
Entrepreneurship
Entrepreneurship and investment are the two factors most often
singled out as critical to economic growth. Studies of
entrepreneurs have shown that those who succeed share certain
traits. They are able to take calculated risks and learn from
their mistakes. Many of them stumble along the way but then
quickly pick themselves up, analyze their errors and are smarter
for having made them. They develop detailed business plans. They
are persistent and patient. Often they begin with little money but
considerable determination. They are also willing to devote
themselves totally to the business. Even though the entrepreneur's
motives are primarily self-centered, the social good that is a by-
product is enormous.
Investment
Investment is the process of exchanging income during one period
of time for an asset that is expected to produce earnings in
future periods. Thus, consumption in the current period is
foregone in order to obtain a greater return in the future.
For an economy as a whole to invest, total production must exceed
total consumption. Throughout the history of capitalism,
investment has been primarily the function of private business;
during the 20th century, however, governments in planned economies
and developing countries have become important investors.
From the standpoint of an individual, two types of investment may
be distinguished: investment in the means of production and purely
financial investment. Although at the individual level both types
may provide a monetary return to the investor, from the standpoint
of the entire economy, purely financial investments appear only as
title transfers and do not constitute an addition to productive
capacity.
Before the 1930s investment was thought to be strongly affected by
the going rate of interest, with the rate of investment likely to
rise as the rate of interest fell. Since then, empirical
investigation has shown business investment to be less responsive
to interest rates and more dependent on businessmen's expectations
about future demand and profit, technical changes in production
methods, and the expected relative costs of labor and capital.
Because investment increases an economy's capacity to produce, it
is the factor responsible for economic growth. For growth to occur
smoothly, it is necessary that savers intend to save the same
amount that investors wish to invest during a time period. If
intended saving exceeds intended investment, unemployment may
result; and if investment exceeds saving, inflation may occur.
- What is the American economic system and how does it differ from other economic systems?
- Under our economic system, how are these questions decided: What to produce, how to produce, how much to produce, and for whom? Research how these questions are decided in some other parts of the world.
- Research what the relationship between money and economic activity. What are the roles of commercial banks and the Federal Reserve banks?
- Capital - accumulated assets calculated to bring income.
- Competition - the effort of two or more parties to secure the business of a third party by the offer of most favorable terms.
- Credit - time given to pay for goods.
- Economic System - system relating to the production, distribution, and consumption of goods and services.
- Eleemosynary - of, related to, or supported by charity.
- Entrepreneur - one who assumes the risk of a business or enterprise.
- Gold Standard - a monetary standard under which the basic unit of currency is defined by a stated quantity of gold and that is usually characterized by the coinage and circulation of gold, unrestricted convertibility of other money into gold, and the free export and import of gold for the settlement of international obligations.
- Income - money gained (as from work or investment).
- Inflation - abnormal increase in the volume on money and credit with a continuing rise in prices.
- Management - the collective body of those who manage or direct an enterprise.
- Philanthropy - an active effort to promote human welfare.
- Prime rate - an interest rate formally announced by a bank to be the lowest available at a particular time to its most credit-worthy customers
- Profit Motive - the desire for an excess of returns over expenditure
- Resources - immediate and possible sources of revenue
- Risk - the possibility of loss.
- To what extent are the guests on the program risk takers? What examples can you cite? How much of a risk-taker are you? Discuss in small groups or in pairs.
- You may have heard older people say that money isn't worth what it once was. Why might that be true? Research today's prices for
some commodity you buy or use regularly compared to its price five
and ten years ago. Then chart or graph your data and share with
your classmates.
- Research the history of money-either in the United States or
other parts of the world. What were the earliest form(s) of money?
Are these still used today?
- What is the rate of commercial banks in the creation of money?
Why aren't commercial banks allowed to make loans in excess of
their reserves?
The following places are an integral part of business and
economics. You might quiz your students by asking them to locate
each place on a map. Then ask students to match each location with
one of the program guests and explain the significance of each
place.
- Wall Street
- Fort Knox
- Chicago Board of Trade
- Federal Reserve Banks
- The Pacific Rim
- Silicon Valley
- Bretton Woods
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