Overview[ edit ] Economic systems is the category in the Journal of Economic Literature classification codes that includes the study of such systems.
January 10, Author: The potential success of each individual is also valued. Capitalism relies on a system of checks and balances brought about through competition. Those who offer inferior service or fail to attract good workers will eventually fail and leave the marketplace.
Low taxes are generally a goal of capitalistic governments. Types of Capitalism When discussed theoretically, capitalism has several unique defining characteristics.
This allows for long-term planning and efficiency, but less innovation. Socialist countries also often have extensive social welfare systems to aid the unemployed, disabled, and elderly. Types of Socialism There are a wide range of socialist political philosophies, including Marxism and reformism.
In addition, there are a number of different economic theories of socialism: While it is a different economic system, many people confuse socialism with communism. Under communism, everything is owned communally, or by everyone.
Ideally, there is no government or class division, and no money; each person contributes to society as best as he or she is able, and takes from that society only what he or she needs. The decisions made by that society are supposed to benefit the people as a whole, not any individual.
The state typically owned all forms of production and practiced very strict central planning — meaning that the government decided how all resources were to be used. IndiaUS ,Japan. Formerly Communist countries by current name: Formerly part of the Soviet Union: The United States, for example, is considered to be a capitalist society, but the Social Security system, which provides support for people who are unable to work, is socialistic.
Sweden is considered by some people to be a socialist country because of its high tax rate and large welfare system, but the majority of industry in the nation is in private hands, which is capitalistic.
Critiques The criticisms of both capitalism and socialism largely stem from different opinions about how economic forces should shape governments and societies. Some critics believe that the human spirit needs competition to fully develop, while others emphasize the need for people to cooperate with each other, ensuring that the needs of all citizens are met.
Within each philosophy, there are additional critics who disagree about how each economic or political system would work best. Critics of capitalism note that the marketplace can be unstable, presenting real dangers to the well- being of those who are not wealthy or who are otherwise vulnerable.
Giving business owners free rein to set the terms of employment and to keep most of the profits from their enterprises tothemselves, can establish a wealthy class which, in turn, can suppress the freedom of others. These critics also note that a purely capitalist society does not address the needs of those who are truly unable to compete either as business owners or as laborers.
Without some social support systems, such as Social Security or welfare, those who cannot work or earn enough money to survive must lead a precarious existence, and may be forced to rely on family or private charity for support. In addition, capitalist critiques of generous socialist social welfare programs note that these programs may discourage people from working, as people may be able to live reasonably well on government benefits rather than having to hold a job.
As a result, families may slip into generational poverty, as the children may grow up feeling entitled to government support.Economic Systems: Capitalism, Communism, and Socialism An economic system consists of the institutions and the method by which resources are allocated and products and services are distributed.
Economic systems differ primarily in who owns the factors of production, how the allocation of resources is directed and the method used to . Economic Systems: Capitalism Overview Capitalism is an economic system that consists of private owned organizations competing in an open market for profit and ownership of the means of production.
Communism and socialism are umbrella terms referring to two left-wing schools of economic thought; both oppose capitalism.
These ideologies have inspired various social and political movements. Socialism and communism are alternative economic systems to capitalism.
In this lesson, you'll learn some of the key concepts behind these economic. Capitalism and socialism are somewhat opposing schools of thought in economics.
The central arguments in the socialism vs. capitalism debate are about economic equality and the role of government. Socialists believe economic inequality is bad for society, and the government is responsible for. Smith employed the term capital in technical economic discussions contained in An Inquiry into the Nature and Causes of the Wealth of Nations (), but he did not describe his economic system as "capitalism." Rather, the latter term seems to have arisen only in the nineteenth century.