| Adam Smith | Scottish philosopher and economist who advocated laissez faire. Scottish-born Smith was the author of the extremely influential book The Wealth of Nations (1776), which argues that the "free hand" of competition will best produce wealth and that governments should not interfere with business.
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| capitalism | A national economic and business system in which the great majority of the basic means of production and distribution of goals are privately owned and managed for profit.
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| collective bargaining | A system in which a labor union negotiates with management to set the wages and working conditions of all members of the union. This is in contrast to the traditional system, in which each worker dealt individually with management.
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| craft and industrial unionism | Craft unions are organized according to a worker's skill--for example, plumbing. Industrial unions are organized according to the industry in which a worker toils, regardless of his or her particular responsibility--for example, coal mining.
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| horizontal integration | The combining of a number of firms engaged in the same enterprise into a single corporation.
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| law of supply and demand | An economic axiom that asserts that when the demand for goods and services exceeds the supply, prices will rise, and when supply surpasses demand, prices will fall.
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| Marxism/communism | A variety of extreme socialism, based on the writings of Karl Marx, that assumes that the inherent conflict between labor and capital will inevitably lead to socialist revolution, the collapse of capitalism, and the emergence of a classless society.
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| monopoly | A business situation in which one company controls virtually the entire market for a particular good or service. The monopoly may be regional or national. (When a few businesses control the market, it is called an oligopoly.)
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| patent | An official government grant, given as an incentive for technological advancement, which entitles an inventor to exclusive right to the proceeds of his or her work for a limited number of years. (See U.S. Constitution, Article I, Section 8.)
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| socialism | An economic theory that emphasizes the importance of class and argues that the interests of workers and capitalists are inherently antagonistic. Socialists believe that a more equitable distribution of the economic benefits of society will result if the people as a whole, through their government, own and manage the basic means of production and distribution.
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| vertical integration | The taking over of all the different businesses upon which a company relies for its product, from resources to distribution.
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