​There have been many types of economic systems over the ages, however, two of the most widespread and conflicting are capitalism and socialism. In this essay, I will be discussing the advantages and disadvantages of each economic system, and why overall I believe that capitalism is better than socialism.

 

Capitalism is an economic system based on the private ownership of the means of production and their operation for profit. This form of economic system is widely used today.

 

Advantages of capitalism:

 

Capitalism allows for increased efficiency. This means that goods and services will be able to be produced more quickly and with less waste involved (waste can be material, time, movement etc.), which will potentially lead to an increase in output and decrease in costs.

 

Capitalism allows for innovation. To stand out in a market, one usually has to have a new, creative product, this requires innovation and creative thinking. This may allow new goods and services to be produced, and these new goods and services may increase the quality of life for a large number of people.

 

A market capitalist economy allows people to own property and pass them down to their successors, causing high economic growth. This high economic growth may (but not always) lead to an increase in income for customers, leading to customers buying more and increasing the standard of living.

 

Disadvantages of capitalism:

 

Capitalism may ignore negative externalities. Negative externalities arise when one party, such as a business, makes another party worse off, yet does not bear the costs from doing so. This causes many different problems, for example, pollution of air. This pollution of air leads to global warming, lung damage, and acid rain.

 

Capitalism allows one to own property and pass both it and wealth on to their successors, this causes inequality as people who are born into a wealthy family didn’t have to work hard to earn it.

 

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.

 

Advantages of Socialism:

 

Socialism redistributes wealth and resources among the population, this allows for the basic needs of people to be met and reduces inequality, this causes a higher quality of life for a large number of people.

 

Socialism may be more economically stable than capitalism. Governments are able to step in when there is an economic crisis and can regulate the economy better so that if and when there is an economic downturn, the impact is reduced on vulnerable populations.

 

The people collectively own many things. This reduces the concentration of power and wealth that a small number of people and businesses possess, leading to there being less risk of exploitation for those who have less power and money.

 

Disadvantages of Socialism:

 

Socialism may not have the level of innovation of capitalism. As there is no profit incentive to start up a business and be creative to be able to beat the competition, there would be less innovation. This would lead to potentially lower quality of life as some innovations would benefit society.

 

Lack of economic efficiency. Due to a planned economy, there may be inefficient resource distribution.

 

Potential limited individual freedom. In order to get things done, a socialist government may control what freedoms individuals and entrepreneurs may have. This may cause demotivation and lead to inefficiency and reduced innovation.

 

Overall, capitalism and socialism have their similarities and differences, yet, considering these advantages and disadvantages, I would have to say that capitalism is the better option, as I believe that the benefits of capitalism outweigh the disadvantages of capitalism, more specifically, I believe that the innovations that capitalism promotes will benefit society greatly and lead to higher quality of life.In order to get things done, a socialist government may 

 

Bibliography:

https://en.wikipedia.org/wiki/Capitalism

https://www.economicshelp.org/blog/5002/economics/pros-and-cons-of-capitalism/

https://www.vedantu.com/commerce/capitalist-economy

https://www.investopedia.com/terms/e/economicgrowth.asp#:~:text=Often%2C%20but%20not%20necessarily%2C%20aggregate,life%20and%20standard%20of%20living.

https://www.britannica.com/topic/negative-externality

https://www.who.int/health-topics/air-pollution#tab=tab_1

https://www.investopedia.com/terms/c/capitalism.asp#toc-pros-and-cons-of-capitalism

https://en.wikipedia.org/wiki/Socialism

https://www.geeksforgeeks.org/socialism/

https://corporatefinanceinstitute.com/resources/economics/socialism/