What?: An economic system where the government does not interfere in business and individuals control the means of production and distribution. (People are free to make business decisions without government interference)
Where?: Pure Capitalism existed in Great Britain during the beginnings of the Industrial Revolution. Today America uses elements (parts) of capitalism as our economic system.
When?: 1776 to modern times.
Who?: Adam Smith famous for his book The Wealth of Nations is given credit as the founder of Capitalism
How?: A free market system meaning that prices are set by buyers and sellers. Individuals are free to make as much money (profit) as they can without interference from the government (Laissez-Faire/Hands Off)
Why?: According to Smith the economies of nation-states functioned better when control of the economy was taken out of the hands of kings and lords and put into the hands of business owners. (Laissez-Fairre)
Importance: The economic system of the United States today.
Positives: Entrepreneurs and those willing to take risks can be rewarded with immense profits.
Negatives: Can create immense poverty for the working classes as no one is concerned with their well-being. Also those entrepreneurs that take risks and fail can be left with nothing.
Related Terms:1) Laissez-Fairre, 2) Free Market, 3) Market Economy
Quote: “It is not from the benevolence (good heartedness) of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Adam Smith.