Positive Impacts Of Capitalism Essay

Question:

Outline the Positive Contributions of Capitalism (including the role of firms and markets) in promoting Improvements in people’s lives. Discuss the concepts and Methods that Economists use to measure these benefits.

Answer:

Introduction

Capitalism is the condition prevailing in the economy where the productive resources are in the hand of the private sector and there are minimum or no control on part of the state. This means that the production dynamics is decided by the free market and there is no intervention on part of the government. Capitalism facilitates profit maximization in the society.

Positive Impacts of Capitalism

Apparently, the Capitalistic framework primarily works towards the maximization of individual residents of the society. However, Capitalism has several positive implications on the residents of the capitalistic society and the society itself.

The primary positive side of Capitalism as a social framework is that it encourages people to work more to be rich. Under this framework, people are paid according to their efforts. Due to the presence of free market system, there exists a substantial competition between the firms of the same industry, which in turn encourages them to use their resources such that their productivity and profitability are maximized. This in turn implies that Capitalism encourages efficiency maximization. Due to the absence of stringent regulations from the government, the consumers in the society enjoy freedom to choose from the goods and services which are present in the economy. Due to the presence of competition in the industry, the firms have to keep the pricing at competitive level, which in turn also benefits the consumers.


The positive effects of Capitalism can be measured in terms of the economic growth of the country as a whole, which can be attributed to the increase in productive efficiency. However, the economic growth does not show the presence and magnitude of inequalities in the country, which can be a hurdle in measuring the actual impacts of Capitalism.

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