Different nation and states utilize unique economic philosophies to manage how limited resources are allocated within their societies. The two most common of these are capitalism and socialism. Even among these two prevailing schools of economic thought, which systems is emphasized can vary from country to country. The United States has always favored strong forms of capitalism since its inception, while China, the Eastern Bloc nations, and the former USSR have experimented with extreme forms of socialism in their recent history. Western Europe, while favoring capitalism, has implemented many socialistic policies to achieve a middle ground between the two. Within said nations, citizens often directly align their preference of economic thought to a blind patriotism to his or her native land’s policies, without a cogent understanding of how such policies work or don’t work. Such dogmatism can be mitigated by under taking a careful examination of both systems’ pros and cons.
The central paradigm in capitalistic economies is that government has a minimal role deciding what, how, and when to produce goods. They trust in Adam’s Smith’s “invisible hand” to allow people’s self-interest and the ensuing laws of supply and demand to determine the cost of goods and services. Moreover, vacuums in the potential market are entrusted to entrepreneurs to spot and fill, without governmental interference.
By allowing individuals to pursue their self-interests, capitalism provides strong