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Capitalist Economy: Individual and Institutions Units - Essay Example

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3: Which unit of analysis is more useful for an understanding of the capitalist economy and its dynamics: institutions or the individual? Justify your answer. Introduction: The paper on the understanding of the capitalist economy discusses different emerging and existing schools of thought in the light of empirical studies…
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Capitalist Economy: Individual and Institutions Units
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Capitalist Economy: Individual and Institutions Units

Download file to see previous pages... In particular, the salient features of a capitalist economy are right to private property, profit-motive, freedom of choice, market forces and minimal role of government. Thus, as such determine the capitalist economy that is characterised by a complex system interacted with individual and institutions. Institutions in border definition are thought as the rules of the game in society or are humanly devised constraints that shape human interaction. Consequently, they can structure incentives in human exchange in such a capitalist economy. On the other hand, individual units such as people, organisations of people, workers, capitalists, consumers, firms, and so on, play an important role in capitalist economy to contribute the economic activities that shape a market force centralised on price mechanism. This paper will analyse the individual unit and institutions unit at the theoretical level through observed scenarios to compare which unit is more practical in a capitalist economy. First of all, I will present the individual unit analysis on understanding a capitalist economy through private property, labour market and profit motive. Second, I will exploit an institutionalist analysis based on its historical and actor centred versions. Third, I will compare individualist analysis and institutionalist analysis and conclude which unit is more useful for better understanding a capitalist economy. Individualist analysis on understanding a capitalist economy: *Private property: As indicated, a capitalist economy is characterised by an economic system that is based upon private ownership of the means of production and the existence of wage labour. This means that things that we buy and sell in the market such as necessaries, cars, homes, and so on, are produced in a process that is privately controlled. According to orthodox economics, the method of itself is to start from the single units that make up the economy, to exploit the functioning of those individual units. In particular, the analytical work done by Callero (2009), states that individualism is a belief system that privileges the individual over the group, the private over the public, and the personal over the social. In other words, this means a capitalist economy that is consisted of individual units like workers, people, capitalists, consumers and firms and as such social forces determines the formation of a capitalist economy. Given the private property as the trait of the capitalist economy, we can normally perceive a sense of how individual units work in the capitalist economy. For instance, a relatively small number of individuals own the factories that produce our cars and computers; a small number percentage of the population owns the land that grows our food and feeds out live-stock, and the raw materials needed to construct out buildings and power our automobiles are held by the very wealthy elite. Those evidences illustrate that the vast majority of people in capitalist economy do not personally own the means of production. Thus, individual units like capitalists, organisations of people and firms own the means of production that are a phenomenon to understand social forces building up a capitalist economy. *Labour Market: As a fundamental characteristic of capitalism, the labour market provides a clear insight about the roles ...Download file to see next pagesRead More
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