Following are the properties of the capitalism.


1) Laissez Faire Economy

                 The capitalism is accorded as natural economic system, free enterprise economy, market economy, price system, system of invisible hand or laissez faire economy. In such a system people have a right to get, to organize and to utilize the resources. The people are authorized to produce and sell goods with the resources owned by them. Here neither other people not the government influence the individuals regarding the purchase of goods they like; the labouring class has a right to choose the professions they wish; and the producers have a freedom to produce the goods they think feasible. Broadly, in capitalism economies, the consumer is like a voter who casts vote with the help of money, i.e, purchase goods and services with money; and the goods which the consumer wants to purchase are the candidates of the voters. Simply, the capitalist economy operates under the miracle of consumer’s vote.


 2) The system of Private property:

                      Under the capitalist system all the resources and properties are owned by the private people, rather government. The state does possess certain resources, but the bulk share of resources is possessed by the people. The private property rights are observed through laws, courts and police etc. The people have a right to use their property as they like. Private property coupled with the freedom to negotiate binding legal contracts, permit private persons or business to obtain control, employ and dispose of property, resources as they see fit.

Despite this property right, use of one’s resources for the production of illicit drugs is prohibited, to use the resources in respect of smuggling and prostitution (in certain countries) is also banned. Again, in some fields, the natural monopolies may be essential to achieve efficiency in the use of resources.


3) System of self interest and invisible hands:

                     As capitalism in an individualistic system, it is not surprising to find that this system entirely operates under the motive of self-interest. Each economic unit attempts to do what is best for itself. As Adam smith says:


Each individual has a desire to improve his lot and when each person possesses such like motivation the society will be prosperous and affluent.


A person can neither work for public interest nor he knows much about it. He only known about his own interest and self interest is a driving force in the economy under the disguise of ‘invisible hands’. The motive of self interest can be defined as:

It is a motive of each producer to maximize his profit, if had to face the losses they must be minimized.


It is a motive of each consumer to maximize his satisfaction by spending a specific income while a labour wishes to earn the maximum amount of wages against rendering his services. The owner of land or capital will sell these resources to the persons etc who pays more prices for these resources. All these shows the capitalism works under self interest and invisible hands.

But the motive of self interest has been accorded responsible for unequal income distribution, mis-allocation of resources and externalities. Thus because of these problems, state has to interfere with.

Read the second part of this article by opening following link.


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