Essay about Capitalism and Socialism - 1566 Words

You buy a house. You choose your job. You shop for the groceries and toys that your income allows you. We take these basics of American life for granted, but these liberties are all because of capitalism. Capitalism is an economic system that enables consumers to determine which products will be sold, lets firms decide how to produce them, and allows markets to guide who gets them. IN the United States, oil is an example of an industry that is run by this principle. Life would be different, however, if the nation was socialist. Socialism is an economic theory that mandates that the governing body, rather than the consumers and firms, control some of the firms on behalf of the community. For example, in Norway and even in capitalist Mexico†¦show more content†¦In addition, capitalism addresses the questions of what products to produce, how they will be produced, and who will receive the products. Firms will make the goods and services that consumers are willing and able to bu y; therefore, consumers determine the products. This is an effective method, because in general people are rational; people respond to incentives; and optimal decisions are made at the margin (Hubbard, 2009). In turn, firms decide how the goods and services are produced. Entrepreneurship allows for common people to operate businesses. An individual can produce an idea, take the financial risk, and begin a business and start selling a good or service. A person’s drive to succeed and natural response to incentives encourage him or her to work. Businesses are guided by profits. Because natural monopolies do occur, a managed capitalistic economy like our own provides for appropriate regulatory methods, but generally the goods are produced by a firm or firms with minimal government interference. Prices for the products are set through competition of firms, by private enterprise, in which the market determines the price. Who, then, determines who gets the final product? The governm ent? In capitalism, markets determine who will receive the goods. Adam Smith developed this concept by naming it the â€Å"invisible hand†Ã¢â‚¬â€the guiding forces of self-interest, supply and demand, and competition to assisting the marketplace along on its own withoutShow MoreRelatedCapitalism And Socialism And Capitalism1952 Words   |  8 PagesFor more than a century capitalism and socialism have been contending to be the best economic system. Socialism is a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. Capitalism is an economic and political system in which a country’s trade and industry that is controlled by private owners for profit. Capitalism is the heart and soul of America s economy. A capitalistRead MoreSocialism : Socialism Vs. Capitalism1156 Words   |  5 PagesEric Butterbaugh Mrs. Penwell English Composition November 8, 2015 Socialism V. Capitalism In the past the word Socialism or Socialist has been used with a negative connotation but recently with the rise of Senator Bernie Sander, Independent from Vermont, running for the Democratic Nomination for President of the United States of America, it has became a positive word that many people are finding themselves agreeing with and flocking to see a Socialist speak about economic and social problemsRead MoreCapitalism Vs. Socialism And Socialism868 Words   |  4 PagesCapitalism vs Socialism Capitalism and socialism have been two school of thoughts in economics that have opposing factors, and there have been a lot of criticisms and comparison on which economy is better in terms of economic equality, and the role that the government plays in the society. 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