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What Is Capitalism

Capitalism is an economic system defined by private ownership of property and businesses, with market forces like supply and demand determining prices. The key characteristics of capitalism are the pursuit of profit, private ownership of capital goods, wages paid to labor, and prices allocating resources. While no modern economy is purely capitalist or socialist, capitalism is based on private property, individual self-interest, competition, market mechanisms, freedom of choice, and limited government intervention. Critics argue that inequality is one of capitalism's most controversial attributes, as the accumulation of private wealth can concentrate in fewer hands over time if left unchecked.

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126 views2 pages

What Is Capitalism

Capitalism is an economic system defined by private ownership of property and businesses, with market forces like supply and demand determining prices. The key characteristics of capitalism are the pursuit of profit, private ownership of capital goods, wages paid to labor, and prices allocating resources. While no modern economy is purely capitalist or socialist, capitalism is based on private property, individual self-interest, competition, market mechanisms, freedom of choice, and limited government intervention. Critics argue that inequality is one of capitalism's most controversial attributes, as the accumulation of private wealth can concentrate in fewer hands over time if left unchecked.

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alberto
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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What is capitalism?

The free market may not be perfect, but it is probably the best way to organize an
economy. It is sued to think that capitalism is an economic system in which private
agents own and control property according to their own interest, and supply and
demand freely set prices in the markets in the most beneficial way for society.

The essential characteristic of capitalism is the motivation to obtain profits. As Adam


Smith said, the philosopher eighteenth-century father of modern economics, "It's not
from the benevolence of the butcher, brewer or baker from where we will get our
dinner, but from your concern for your own interests". In a voluntary exchange
transaction however, both parties have their own interest in the results, but none can
get what they want without taking into account what the other wants. It is this rational
self-interest that can lead to economic prosperity. In a capitalist economy, capital
goods like factories, mines and railways- can be owned and controlled private, labor
is purchased for wages in money, Capital gains correspond to private owners, and
prices allocate capital and labor to competing uses each.

Although the basis of almost all economies is today some kind of capitalism, for
much of the last century this was just one of the two main methods of organization
economic in the other, the socialism, the State has the means of production, and
state enterprises seek to maximize the social good before profits.

Pillars of capitalism
Capitalism is based on the following pillars:

•Private property, that allows people to own assets tangible assets, such as land and
housing, and intangible assets, such as stocks and bonds.
•Own interest, whereby people pursue their own well, without considering the
sociopolitical pressures. However, the uncoordinated behavior of those individuals
ends benefiting society as if, according to Smith in1776 in The Wealth of Nations,
was driven by an invisible hand.

Competition, which, thanks to the freedom of the companies to enter and exit
markets, maximizes social welfare, that is: the joint well-being of producers and
consumers.
• A market mechanism which determines the prices of decentralized form through
interactions between purchases- sellers and sellers; prices, in turn, allocate
resources, which naturally they seek the greatest reward, not only for the goods and
services but also for wages.
• Freedom of choice with respect to consumption, to the - and investment:
dissatisfied customers can buy different products; investors, undertake more
projects lucrative, and workers, leave their employment for a better remuneration.
• State limited intervention, to protect the rights of private citizens and maintain an
orderly environment that facilitates the correct functioning of the markets. The
various forms of capitalism are distinguished by the degree to which those pillars
work. In free economies market, or laissez-faire, the markets operate with little or no
regulation In the mixed economies, where they combine markets and the State, the
former have a dominant role but are regulated to a greater extent by the second, to
correct their faults, such as pollution and congestion transit; promote social welfare,
and for other reasons, such as defense and public safety. Currently, the mixed
capitalist economies.

The forces that usually lead to success of capitalism can also cause your failure.

Economic growth in a capitalist regime perhaps has far surpassed that of other
economic systems, but the inequality it remains one of its most controversial
attributes. Is it that the dynamics of private capital accumulation inevitably leads to
the concentration of wealth in less hands, or that the resulting balance of growth,
competition and technological progress reduces inequality? The economists have
adopted different approaches to explain inequality economic a collection is analyzed
in the most recent study unique data dating back to the eighteenth century to
discover economic and social patterns of key importance (Piketty, 2014), and it is
observed that in the market economies the profit rate of the investment frequently
exceeds overall growth. If that discrepancy persists, a compound values, the wealth
in the hands of the owners of the capital will increase much more rapidly than other
types of gains (wages, for example), to finally surpass them by a wide margin.

Although that study has so many critics as admirers, has added elements to the
debate on the distribution of wealth in capitalism and has reinforced in many the
belief that a capitalist economy must be oriented in the right direction by state
policies and the general public to ensure that the invisible hand of Smith continues
to operate in favor of society.

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