Question

Now that most of you have atleast a basic working knowledge of our economic system (it's positives & negatives) as a result of your recent assignments, discussion questions, etc., it's time to expand your knowledge and perceptions of other planned economies. Refer to your textbook (or other sourses) to obtain a thorough comprehension of the features of each economic system: Capitalism, Communism, Socialism, Mixed Economy. Discussion Question: After considering the characteristics of each alternative economic system coupled with your recently expanded knowledge of our capitalistic economy, discuss the advantages and disadvantages of these systems and which one would best serve the needs of the American people in general. Be very explicit with your answers and opinions.

Answer 1

Capitalism is an economic system where all the four factors of production are owned by the private companies.

Advantages are that Capitalism increases competition and makes businesses efficient,innovative and competitive. Businesses try to cut costs and avoid waste.However capitalism leads to marginalization as there is no place for elderly, children and the disabled as they do not have skills.Disadvantages are that Capitalism ignores negative externalities such as pollution and damage to health.Private ownership of factors of production gives monopoly power to industry and they can charge high prices.

Socialism is an economic system where everything is regulated by the government to ensure welfare and social justice to the people. Thus assurance of social justice is the main merit of it.This brings rapid economic development. Here production is directed to satisfy the basic needs of the people.Socialist brings economic stability whereas capitalism is always subjected to economic fluctuations.It has control on market forces and so it is more flexible.It gives equal opportunities to earn income and leads to equitable distribution of wealth and income.Disadvantages are that there is no profit motive and so no working incentive.There is loss of economic freedom and consumer sovereignty as everything is controlled by central planning authority..

In Communism ,means of production are controlled by central state authority and there is restriction on private ownership of personal property.Advantages are full employment of man power,rapid development and economic growth and equitable distribution of wealth.Disadvantages are personal freedom does not exist and workers are treated as machines.Central state authority controls the economic system.

In mixed economy all activities in production are controlled by private and government entities.Advantages are quick economic development, reduction in income inequalities,.and there is freedom to own private property.Disadvantages are that private industries will always stay on fear that their industries will be taken away by the government,it also hinders maximum use of available resources as the government produces goods for the society and not for the betterment of the economy.It leads to higher taxes as the government tries to collect more revenue.

I think Capitalism is best suited for America as the government should not entirely control the production system but should regulate the economy and ensure that it does not negatively affect the welfare of the nation.