Capitalism refers to an economic system in which all or most of the capital (the means of production) is owned and operated by the private sector. In a capitalist or market economy investment is allocated and prices of commodities are determined in a free market rather than by the state. Those in control of capital - the (capitalists) make investments for the sole purpose of making a profit. Proponents of capitalism generally favor a small state, and fewer regulations. Capitalism is often associated with a liberal, libertarian or corporatist political philosophy.

Capitalism contrasts with socialism, where the majority of the capital is owned and used by the state. An economy in which a large public sector co-exists with a large private sector is called a mixed economy. Adam Smith is generally regarded as the intellectual father of capitalism, and in the wealth of nations he observed that since . . .
  1. one becomes rich only by providing things others want to buy at a price they can afford
  2. competition between sellers will prevent customers from being gouged
  3. people will follow opportunity to provide for all the wants of the customer.
. . . the practice of private greed would lead to a general prosperity.

Problems with Capitalism

There are some generally recognized problems with the theory capitalism. Proponents argue that for each of the these problems, "the cure is worse than the disease".
  • wealth creates power - the frequent objective for those who attain wealth is to use the influence it affords to have the state to make laws in their favor, distorting the free market, and increasing their wealth - a vicious circle
  • people are not that rational - capitalist theories are based on mathematical theorems and models requiring perfectly rational people who do not exist in the real world. "in a perfect world free markets are the most efficient" does not necessarily mean "in the real world more free markets will be better." In a free market, those with the ability to manipulate fallible people have every incentive to do so.
  • the public goods problem - economic theory recognizes that there many goods and services the market will not provide because the benefits of the good/service can't be excluded from those who didn't pay for it. (e.g. clean air). see: market for government


private sector, industry, free market, small state, libertarianism, market economy, private property, socialism

[+] Position: Capitalism "as a religion" must go

[+] Position: Unlike socialism, libertarianism has not been tried.

Sources and Resources

Capitalism - Wikipedia, the free encyclopedia