What is Economics?

The allocation of scarce resources to people’s unlimited wants is a vital aspect of life which affects both welfare and fairness, and just how much each person gets depends on the economic system in place. In this essay I aim to argue in favour of regulated capitalism and show that it is in fact efficient, fair and practicable. In doing this, I will start by looking at the extreme cases that economic systems can take on and how these prove to have short comings. On one end of the spectrum we look firstly at pure capitalism and on the other end, pure socialism. I then go on to look at the consequences of these systems to identify the morally correct one based on the consequences that the economic system brings about.

Without competition, monopolies exist and instead of the market setting the prices, the seller is the price setter, which is against the conditions of capitalism. The goal of capitalism is to maximize profit and minimize cost, promoting healthy competition between businesses as they meet the demands of consumer. The merit of capitalism are it is an internally stable economic system, in that it is consistent with human action. Capitalism is also externally stable, in that survival in a capitalistic system requires innovation and flexibility to keep up with the changes in supply and demand. Capitalism is a large population, diversified societies tend to gravitate towards hierarchical social systems.

In modern industrial economics, it is still assumed that to gain economic efficiency from production, the economy would get so at the cost of an increase in income inequality. Greater equality is believed to reduce investment and work incentive, so system of rewards and penalties can encourage effort and channel it into socially productive activity. This reflects the living standards and material wealth of families in the economy, but this pursuit of efficiency necessarily compromises with inequalities and hence, the society faces a tradeoff between equality and efficiency. Not only can more equal distribution of income reduce incentives to work and invest, but the efforts to redistribute through tax system and other transfer programs can themselves be costly. Although, when growth is looked at over the long term, the trade-off between efficiency and equality may not be as prominent and equality may appear to be an important ingredient in promoting and sustaining growth.

Introduction The reason said consumers better off as a result of economic rationalism because consumers can enjoy more fairness in the market. For instance, consumers have more information about price, utility, quality and product materials that they can compare with substitution in the market and select the best fit product. Also, economy closer to free market can inspire product innovation. The concept of economic rationalism aim at market efficiency to reach entire society interest maximization, through deregulation, a free market economy, privatization of state-owned industries, lower direct taxation and higher indirect taxation, and a reduction of the size of the welfare state, for example, privatization of public utilities and free trade

Socialism allows people to be equal. Socialist beliefs the economic inequality can be unethical for society and the government reduces it by creating programs to help the poor for example, social security benefits and Medicare. The economy’s activity and production are based on individual intake and demands. It is planned by the Central Planning Authority. Advantages of Capitalism Some advantages of Capitalism include consumer choice, the efficiency of economics, and

Investors are an important factor to consider because without investment the economy will decline. To sum up, investment solves vital economic problems and is a nourishing factor to the economy. Investors desire to invest in a capitalist economy because they make their own decisions not like communist economy and they set their own prices and they are not restricted to minimum wages. It is clear that capitalism is more advantageous than communism in every aspect in the economy. All stakeholders such as common people, state, government, banks, and investors will benefit more in a capitalist economy.

However, these things happened in Socialism and Communism as well; the only difference is that in Capitalism the people have the choice to become better. Capitalism allows you to sell and buy as you wish, creating economic growth. Capitalism improves the livings standards of the society overall. Furthermore, there are no better alternatives than capitalism because history has shown failures of communism and economies with too much government

Competition Leads to a More Efficient Use of Resources The word “efficiency”, in economists’ dictionary, is often interpreted into the degree of an economy allocates scarce resources to meet the needs and wants of consumers. As we can see that a free market economy is the one in which resources are allocated based on the principle of self-interests. Where there are profits, there are firms, and where there are firms to produce identical goods and services, inevitably, there is competition. The degree of competition determines the market structure which is the main determinant of the behaviour or conduct of firms. This in turn determines the efficiency in the use of scarce resources.

In conclusion, there is a great advantage of living in a nation where there is a low amount of government intervention in the economy, because government intervention reduces the freedom of markets, causes a slow growing economy, and exploits the consumers in the economy. Capitalism provides a marketplace where industries compete in order attract more consumers, therefore providing more efficient, qualitative and plenty of variety for consumers. This efficiency, quality, and variety will help the economy grow in whatever way it wants to, making capitalism the most flexible economic systems. The nature of human beings is, one is satisfied, when he/she has provided the necessities for himself first, then the people around him.

These inequalities are best observed in the credit, education, and labor markets. The question of whether the use of free markets is truly preferable method for improving society will be discussed. To elaborate, Adam Smith stated that man should not try to do good, but let good develop as a byproduct of self-interest. Indeed the principle of self-interest has been and always will be the driving force behind the market’s successes. However, since the majority of people do act in their own self-interest, competition develops in the market both among the buyers’ and among the sellers’.