What Is Capitalism?: Depression (E.g. Keynes) and The Cold War (E.g. Hayek

What Is Capitalism?
In common usage capitalism refers to an economic system in

which the means of production are privately owned and
operated in order to generate capital, and where investment and
the production, distribution and prices of commodities (goods and
services) are determined mainly in a free market, rather than by
the state. The means of production are usually operated
in pursuit of profits.
Capitalism is contrasted with feudalism, where land is
owned by the feudal lords, who collect rent from private
operators; socialism, where the means of production is owned
and used by the state; and communism, where the means of
production is owned and used by the community collectively.
An economy with a large amount of intervention - which
may include state ownership of some of the means of production -
in combination with some free market characteristics is
sometimes referred to as a mixed economy, rather than a
capitalist one. Some economists oppose all or almost all state
control over an economy. By some definitions, all of the
economies in the developed world are capitalist, or mixed
economies based on capitalism. Others see the world integrated
into a global capitalist system, and even those nations which
today resist capitalism, operate within a globalized capitalist
economy.
Anders Chydenius was first to propose free trade and
industry and to lay out the principles of liberalism in 1765,
eleven years before Adam Smith. Yet, Adam Smith became more
famous as the intellectual father of capitalism. From then on,
most theories of what has come to be called capitalism developed
in the 18th century, 19th century and 20th century, for instance in
the context of the industrial revolution and European
imperialism (e.g. Chydenius, Smith, Ricardo, Marx), The Great
Depression (e.g. Keynes) and the Cold war (e.g. Hayek,
Friedman).
These theorists characterize capitalism as an economic
system in which capital is owned by the capitalist class and
economic decisions are determined in a market – that is, by
trades that occur as a result of agreement between buyers and
sellers; where a
market mentality and entrepreneurial spirit exists; and where
specific, legally enforceable, notions of property and
contract are instituted. Such theories typically try to explain why
capitalist economies are likely to generate more economic
growth than those subject to a greater degree of governmental
intervention.
Some emphasize the private ownership of capital as being
the essence of capitalism, or emphasize the importance of a free
market as a mechanism for the movement and accumulation of
capital, while others measure capitalism through class analysis
(i.e. class structure of society, relations between
the proletariat and the bourgeois). Some note the growth of a
global market system.
Others focus on the application of the market to human labor.
Still others, such as Hayek, note the self-organizing character of
economies which are not centrally-planned by government. Many,
such as Adam Smith, point to what is believed to be the value of
individuals pursuing their self-interest as opposed
to altruistically working to serve the "public good."
Many of these theories call attention to various economic
practices that became institutionalized in Europe between the
16th and 19th centuries, especially involving the right of
individuals and groups of individuals acting as "legal persons" (or
corporations) to buy and sell capital goods, as well as land,
labor, and money, in a free market, and relying on the state for
the enforcement of private property rights rather than on a
system of feudal protection and obligations.
Aside from referring to an economic or political system,
capitalism may also refer to the condition of owning capital.
Likewise, in addition to the term "capitalist" referring to someone
who favors capitalism, capitalist also commonly refers to a
person who owns and controls capital.

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What Is Capitalism?

In common usage capitalism refers to an economic system in

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