StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Benefits and Limitations of Capitalism - Essay Example

Cite this document
Summary
The author of the present paper under the title "Benefits and Limitations of Capitalism" will begin with the statement that both economics and philosophy have since the earliest times tried to prove that humans are highly rational and caring beings. …
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER93.1% of users find it useful
Benefits and Limitations of Capitalism
Read Text Preview

Extract of sample "Benefits and Limitations of Capitalism"

The 20th century has been one of relative peace, with the decline of mercantilism and the spread of British-style liberalism. The implementation of Adam Smith’s ideas of a free market economy, where the invisible hand would determine how what and how much to produce in what quantities were a radical concept, as was his assertion that saving is better than consumption, giving rise to a capitalist economy. It was supported by David Ricardo’s Theory of Comparative Advantage as the basis for international trade and exchange. Modern societies depend on elected leaders and thinkers as they try to find solutions to our communal problems and bring a sense of order and belonging to our daily lives. This involves the formulation of policies that are in the public interest. In fact, the degree of evolution of society can be traced to the quality of its laws, policies, procedures, ethics, and morals that define and perpetuate its existence. A qualifying criticism that can be leveled against policymakers is that they tend to act in their own self-interest rather than in the public interest. In other words, power tends to corrupt the best of individuals as they tend to seek what is best for them rather than society at large. F.A. Hayek saw these deficiencies in the mechanism of socialist economies as well as a capitalistic system. He argued that it was liberalism that needed to be included in the system to make it work better (Hayek, 23). Ronald Coase would interject that social costs would also enter into the equation of deciding the price of a good, as few entrepreneurs or capitalists have the capacity or talent to produce goods themselves (Coase, 12). 

The answer to this quandary would therefore lie in public and private watchdogs, professional and private agencies that make it their duty to point out the good and bad points of evolving laws and policies- much like a Board of Governance in a modern organization. The only caveat is that they should be answerable to no one but society at large. If we truly acted principally in the public interest and not just our own, we would soon realize that working in the best interests of society will eventually elevate both our individual and national character. I for one would definitely agree that public policy should be approached in this way.        

  1. The price mechanism plays a key role in Friedman’s arguments about the benefits of capitalism. According to Friedman, the price mechanism is the best way to make economic decisions on the grounds of both efficiency and morality. Do any of the other theorists we have read this semester provide compelling arguments to the contrary? What are those arguments, and which—if any—do you find most convincing?

A basic premise of modern economics is that value is determined by the price we pay for a good or service. In other words, price is what determines value. Going deeper into the concept of value, we see that it emerges from the concept of scarcity. Free goods are those that are freely available in society, like the air we breathe, and therefore do not demand a price. Economic goods on the other hand are scarce and it is the demand for them which in turn derives from their possible uses that determine their price or value at a specific point in time.

In the aftermath of the Great Depression, the Gold Standard was abandoned. Modern economies though not always backed by gold, state that the issued currency is a thing of value because the Government has deemed it so. In other words, value is given by a social convention of general acceptability as much as by its marginal utility. Both Hayek and Bohm Bawerk have ridiculed the efficiency of the Government in its efforts to maintain economic stability, evidenced by the financial crises we have seen ever since finance and capitalism have ruled economic activity.

While Friedman would argue that the price mechanism is the best determinant of value in a capitalist economy (Friedman, 39), Charles Lindblom would state that both politics and economics are inexorably linked and that one cannot be approached without stepping on the other. In other words, policy changes should be made for the public good through the evolutionary process of muddling through. Capitalists are hardly moralists- they cannot be trusted to make decisions in the best interests of society because they have their own interests at the uppermost- to get the best returns on their capital and entrepreneurship abilities at the lowest cost to themselves using labor, land, machinery and other technologies (Lindblom, 214). Both issues of morality and efficiency are controlled by Government watchdogs and interest groups lobbying for popular decisions. Thereby Lindblom contends that we are limited by our choices. Politics even in the so-called enlightened economies can best be regarded as a group of oligarchic elites that compete and bargain with each other for what is to be decided. Although the present market system has many failings, it is the only mechanism being allowed by the political system that decides how economic questions are to be answered in a democratic setup.       

Read More
Tags
Cite this document
  • APA
  • MLA
  • CHICAGO
(“LOVE Essay Example | Topics and Well Written Essays - 500 words”, n.d.)
LOVE Essay Example | Topics and Well Written Essays - 500 words. Retrieved from https://studentshare.org/history/1590076-love
(LOVE Essay Example | Topics and Well Written Essays - 500 Words)
LOVE Essay Example | Topics and Well Written Essays - 500 Words. https://studentshare.org/history/1590076-love.
“LOVE Essay Example | Topics and Well Written Essays - 500 Words”, n.d. https://studentshare.org/history/1590076-love.
  • Cited: 0 times

CHECK THESE SAMPLES OF Benefits and Limitations of Capitalism

State Capitalism

Name of author: State capitalism capitalism refers to an economical system in which production system is owned by private people for making profits.... State capitalism has several meanings and definitions; however, it can be generally defined as a society in which productive elements were controlled by the state in a capitalist manner.... Communist countries like China and Russia are examples of countries in which state capitalism prevails....
13 Pages (3250 words) Essay

The Volatility of Capitalism as a Financial Scheme

The paper "The Volatility of capitalism as a Financial Scheme" analyzes the effective administration and procedure of capitalism.... There is no short and so straightforward delineation of the notion is usually acknowledged, for the straightforward cause that communal idea in general, in a sense, this is a try to work out the source, environment, and destiny of capitalism.... Theories State capitalism is a scheme in which the government actions as "the superior financial contestant, and is utilized mostly in markets for political purposes....
12 Pages (3000 words) Essay

Two Types of Free Market Philosophies

Smith supposed that individual benefit rather than state control was the proper objective; he, therefore, campaigned that trade should be conducted without government limitations.... The paper "Two Types of Free Market Philosophies" suggests that the philosophy assumed that individuals who pursue their personal desires contribute most effectively to society....
12 Pages (3000 words) Essay

Criticizing the Economic Theories

He developed his theory at a time when capitalism was beginning to take shape as the society was gradually moving from feudalism with rapid industrialization in Europe at the time.... His theories helped to establish the foundation to capitalism.... Marx's opposition to capitalism Karl Marx was one of the most vocal thinkers to be opposed to capitalism.... He saw capitalism as just any other historical stage that would eventually end and be replaced by Socialism....
3 Pages (750 words) Essay

Can socialism be achieved within a capitalist society

Under capitalism, the government has little control over labour forces (Wu, 2002, p.... capitalism solves this problem through the theory of value, which asserts that an individual can only chose a good whose value is appeasing.... Can Socialism be achieved within a Capitalist Society?...
3 Pages (750 words) Essay

Elite's Theory and Marxism Theory in Power and Politics

From this work, it is clear about the use of power, critics of capitalism, the artificial dichotomy between Marxists' position, and that of institutional elitists.... Marx's theory explains that capitalism is an intrinsically contradictory system, overwhelmed by class conflict.... Furthermore, as capitalism develops and the capitalists grow more powerful in influencing the state and politics the class conflict worsens.... n Marx's theory, the state also looks after the long-term interests and benefits of the capitalists....
9 Pages (2250 words) Coursework

The Ways in Which Marx and Weber Understand the Nature of Capitalism

The paper "The Ways in Which Marx and Weber Understand the Nature of capitalism" states that for Weber the appearance of capitalism should be expected since man is strongly dependent on money – in all its forms, including the property, a part of capitalism for Marx.... For Marx the appearance and the development of capitalism have been promoted through the efforts of labour class against the feudal style of governance; in other words, capitalism has been created by labourers who lost its control – the capitalists gained the advantage to control the exchange of capital in the capitalistic system of governance....
7 Pages (1750 words) Literature review

How Capitalism Works in Different Scenarios

This research 'How Capitalism Works in Different Scenarios' provides a deep insight into major features of capitalism - a division of classes, the profit motive, and capitalism as a free market.... Another form of capitalism but a sophisticated one is through the investment of money into projects which will later return as profits.... Blaut (127) explains the history of capitalism by first letting the people know the transitional debate history....
15 Pages (3750 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us