Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. The defining characteristics of capitalism include capital accumulation, competitive markets, price systems, private property, recognition of property rights, self-interest, economic freedom, meritocracy, work ethic, consumer sovereignty, economic efficiency, limited role of government, profit motive, a financial infrastructure of money and investment that makes possible credit and debt, entrepreneurship, commodification, voluntary exchange, wage labor, production of commodities and services, and a strong emphasis on innovation and economic growth. In a market economy, decision-making and investments are determined by owners of wealth, property, or ability to maneuver capital or production ability in capital and financial markets—whereas prices and the distribution of goods and services are mainly determined by competition in goods and services markets.
Socialism is an economic and political philosophy encompassing diverse economic and social systems characterised by social ownership of the means of production, as opposed to private ownership. It describes the economic, political, and social theories and movements associated with the implementation of such systems. Social ownership can take various forms, including public, community, collective, cooperative, or employee. As one of the main ideologies on the political spectrum, socialism is considered the standard left wing ideology in most countries of the world. Types of socialism vary based on the role of markets and planning in resource allocation, and the structure of management in organizations.
In political philosophy, the means of production refers to the generally necessary assets and resources that enable a society to engage in production. While the exact resources encompassed in the term may vary, it is widely agreed to include the classical factors of production as well as the general infrastructure and capital goods necessary to reproduce stable levels of productivity. It can also be used as an abbreviation of the "means of production and distribution" which additionally includes the logistical distribution and delivery of products, generally through distributors; or as an abbreviation of the "means of production, distribution, and exchange" which further includes the exchange of distributed products, generally to consumers.
In neoclassical economics, market failure is a situation in which the allocation of goods and services by a free market is not Pareto efficient, often leading to a net loss of economic value. The first known use of the term by economists was in 1958, but the concept has been traced back to the Victorian philosopher Henry Sidgwick. Market failures are often associated with public goods, time-inconsistent preferences, information asymmetries, non-competitive markets, principal–agent problems, or externalities.
In the social sciences, social structure is the aggregate of patterned social arrangements in society that are both emergent from and determinant of the actions of individuals. Likewise, society is believed to be grouped into structurally related groups or sets of roles, with different functions, meanings, or purposes. Examples of social structure include family, religion, law, economy, and class. It contrasts with "social system", which refers to the parent structure in which these various structures are embedded. Thus, social structures significantly influence larger systems, such as economic systems, legal systems, political systems, cultural systems, etc. Social structure can also be said to be the framework upon which a society is established. It determines the norms and patterns of relations between the various institutions of the society.
Democratic capitalism, also referred to as market democracy, is a political and economic system that integrates resource allocation by marginal productivity, with policies of resource allocation by social entitlement. The policies which characterise the system are enacted by democratic governments.
An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.
Economic sociology is the study of the social cause and effect of various economic phenomena. The field can be broadly divided into a classical period and a contemporary one, known as "new economic sociology".
A theory of capitalism describes the essential features of capitalism and how it functions. The history of various such theories is the subject of this article.
The culture of capitalism or capitalist culture is the set of social practices, social norms, values and patterns of behavior that are attributed to the capitalist economic system in a capitalist society. Capitalist culture promotes the accumulation of capital and the sale of commodities, where individuals are primarily defined by their relationship to business and the market. The culture is composed of people who, behaving according to a set of learned rules, act as they must act in order to survive in capitalist societies.
Albert Otto Hirschman was a German economist and the author of several books on political economy and political ideology. His first major contribution was in the area of development economics. Here he emphasized the need for unbalanced growth. He argued that disequilibria should be encouraged to stimulate growth and help mobilize resources, because developing countries are short of decision-making skills. Key to this was encouraging industries with many linkages to other firms.
The Great Transformation is a book by Karl Polanyi, a Hungarian political economist. First published in 1944 by Farrar & Rinehart, it deals with the social and political upheavals that took place in England during the rise of the market economy. Polanyi contends that the modern market economy and the modern nation-state should be understood not as discrete elements but as a single human invention, which he calls the "Market Society".
Articles in economics journals are usually classified according to JEL classification codes, which derive from the Journal of Economic Literature. The JEL is published quarterly by the American Economic Association (AEA) and contains survey articles and information on recently published books and dissertations. The AEA maintains EconLit, a searchable data base of citations for articles, books, reviews, dissertations, and working papers classified by JEL codes for the years from 1969. A recent addition to EconLit is indexing of economics journal articles from 1886 to 1968 parallel to the print series Index of Economic Articles.
In economics, a market is a composition of systems, institutions, procedures, social relations or infrastructures whereby parties engage in exchange. While parties may exchange goods and services by barter, most markets rely on sellers offering their goods or services to buyers in exchange for money. It can be said that a market is the process by which the prices of goods and services are established. Markets facilitate trade and enable the distribution and allocation of resources in a society. Markets allow any tradeable item to be evaluated and priced. A market emerges more or less spontaneously or may be constructed deliberately by human interaction in order to enable the exchange of rights of services and goods. Markets generally supplant gift economies and are often held in place through rules and customs, such as a booth fee, competitive pricing, and source of goods for sale.
Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy.
In system theory, differentiation is the increase of subsystems in a modern society to increase the complexity of that society. Each subsystem can make different connections with other subsystems, and this leads to more variation within the system in order to respond to variation in the environment.
Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish communism from capitalism, and is one of the fundamental defining characteristics of communism.
In economics and economic sociology, embeddedness refers to the degree to which economic activity is constrained by non-economic institutions. The term was created by economic historian Karl Polanyi as part of his substantivist approach. Polanyi argued that in non-market societies there are no pure economic institutions to which formal economic models can be applied. In these cases economic activities such as "provisioning" are "embedded" in non-economic kinship, religious and political institutions. In market societies, in contrast, economic activities have been rationalized, and economic action is "disembedded" from society and able to follow its own distinctive logic, captured in economic modeling. Polanyi's ideas were widely adopted and discussed in anthropology in what has been called the formalist–substantivist debate. Subsequently, the term "embeddedness" was further developed by economic sociologist Mark Granovetter, who argued that even in market societies, economic activity is not as disembedded from society as economic models would suggest.
Economic democracy is a socioeconomic philosophy that proposes to shift ownership and decision-making power from corporate shareholders and corporate managers to a larger group of public stakeholders that includes workers, consumers, suppliers, communities and the broader public. No single definition or approach encompasses economic democracy, but most proponents claim that modern property relations externalize costs, subordinate the general well-being to private profit and deny the polity a democratic voice in economic policy decisions. In addition to these moral concerns, economic democracy makes practical claims, such as that it can compensate for capitalism's inherent effective demand gap.
Social ownership is a type of property where an asset is recognized to be in the possession of society as a whole rather than individual members or groups within it. Social ownership of the means of production is the defining characteristic of a socialist economy, and can take the form of community ownership, state ownership, common ownership, employee ownership, cooperative ownership, and citizen ownership of equity. Within the context of socialist economics it refers particularly to the appropriation of the surplus product produced by the means of production to society at large or the workers themselves. Traditionally, social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned and integrated by a single entity or network of entities representing society. However, the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy.
