![]() In a capitalist economy, capital assets-such as factories, mines, and railroads-can be privately owned and controlled, labor is purchased for money wages, capital gains accrue to private owners, and prices allocate capital and labor between competing uses (see “ Supply and Demand”).Īlthough some form of capitalism is the basis for nearly all economies today, for much of the past century it was but one of two major approaches to economic organization. It is this rational self-interest that can lead to economic prosperity. As Adam Smith, the 18th century philosopher and father of modern economics, said: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Both parties to a voluntary exchange transaction have their own interest in the outcome, but neither can obtain what he or she wants without addressing what the other wants. ![]() The essential feature of capitalism is the motive to make a profit. ![]() Free markets may not be perfect but they are probably the best way to organize an economyĬapitalism is often thought of as an economic system in which private actors own and control property in accord with their interests, and demand and supply freely set prices in markets in a way that can serve the best interests of society. ![]()
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