Free Markets: How Do They Work and Does the US Have One?

Liberty Nation GenZ  believes in educating young Americans about the U.S. and its Constitution. This high school lesson plan can be used in the classroom or the home, and adapted to a range of student abilities.

Objectives

• Students will be able to describe how the free market is applied in the U.S.
• Students will be able to explain the advantages and disadvantages of free markets.
• Students will be able to debate/discuss what aspects of American society use free markets and which do not.

Materials

ARTICLE: America’s Economy: How It Works  discusses the U.S. economic system, which parts are more socialized, and which rely on free markets.

HANDOUT: Economics classification diagram

VIDEO: Why Do Free Markets Work?  discusses three reasons why the free market system is successful.

HANDOUT: Debate information sheet describing three arguments for free markets and three against.

HANDOUT: Video comprehension quiz.

HANDOUT: Video discussion questions.

Suggested Procedure

Step 1

Ask students how the US economy works. Give them a few minutes in groups or individually to formulate an explanation. They could create a flow chart/diagram to consolidate their ideas before presenting their explanation to the teacher/class. Note the similarities and differences between each version.

Step 2

Ask for any pre-existing knowledge the students may have about free markets. Where have they heard the term? What was the circumstance? Was the concept presented in a positive or negative light? Repeat the process with the terms “socialism” or a “socialized economy”. Ask what other market or economic systems they are familiar with.

Step 3

Students read America’s Economy: How It Works. This may be read from the internet or printed so that students can read a copy individually or in groups.

Step 4

Ask students to fill in the economics classification diagram Have them work as a group to name aspects of government, the economy, and American life that fit into the two categories, “free market” and “socialized.” Are there any that cross the divide? Students can debate with each other regarding which elements belong where.

Step 5

Ask students why they think the U.S. has by and large chosen to adopt free markets as opposed to another system. Discuss what results this has had for the country and the world.

Step 6

Show video Why Do Free Markets Work?

Suggested places to stop and ask questions:

• 1:00 – How do the students feel free markets might promote wealth?
• 1:15 – Can students provide a definition of wealth that remains relevant across different countries and cultures?
• 1:32 – Can students give a real-life example of a consensual and voluntary trade?
• 2:05 – What markets or companies can students think of that may have an unfair advantage?
• 2:17 – How do free markets promote innovation?
• 2:47 – Can the students give examples of social media companies that have created jobs? How does this tie in with free markets?
• 3:11 – Discuss the Milton Friedman

Step 7

Discuss how an entrepreneur could start a company in a system where there was no free market. What problems might they encounter?

Step 8

Hand out debate information sheet and allow students to read individually or as a group.

Step 9

Have students complete the comprehension quiz.

Step 10

Have students complete the discussion sheet  individually or in groups.

Extension 1

Research project: Students choose a country and write a report on what economic system it uses. Does it have mostly free markets,  a socialized system, a mix of the two? Students may present their findings with an analysis of their own thoughts on the research. They may compare and contrast their chosen country with the U.S.

Extension 2

Read the article Capitalism vs. Socialism: Who controls the market?

Related discussion questions could include…

• Are free markets and capitalism the same thing?
• How do Republican and Democrat approaches to the economy differ? Can you cite any real- life examples?
• Socialist economics typically involve greater government intervention – what other areas of life could this affect?
• Does all capitalism involve less government intervention in the economy?
• What differentiates left-wing and right-wing ideas?

Download PDF of this lesson plan and handouts