Principal of Economics
Subject:- principles of economics
1. Defects of capitalism
The market economy or capitalism has a number of defects. In analysing these defects it is obvious that some form of government rules and regulations are necessary in order to protect the environment and future generations.
1. Increasing inequality in wealth: As an economic system characterized by the private ownership of the means of production and distribution, there exists the obvious tendency for the increasing inequality in wealth. Because the entrepreneur has the advantage to manipulate the factors of production, especially labour and capital, as he considers best in order to achieve the highest measure of profit. By the end of the day, the capitalist receives a considerable portion of the profits that accrue to the business enterprise, while the labourers or working class, gets comparatively less reward for their efforts. This widens the gulf of economic inequality. However, with the increased recognition of collectively bargaining, this tendency is gradually being checked.
2. Goods and services that have high utility to the ordinary citizens are in short supply or non-existent: In a capitalistic economy profit is the motivation behind all productive endeavours. This way, productive scarce resources could be “wasted” on goods and services that serve no basic purposes, while other goods and services that have high utility to the ordinary citizens are in short supply or non-existent. For example, basic commodities such as pipe-borne water, regular electricity, effective health care, ands others.
3. Monopoly: Another defect of capitalism pertains to monopoly, this is a situation whereby there is only one producer of a commodity in a region or locality. For example, an employer may be the only purchaser in a locality, and if this happens, he would be in a strong position when negotiating rates to pay the individual members of the
1. Defects of capitalism
The market economy or capitalism has a number of defects. In analysing these defects it is obvious that some form of government rules and regulations are necessary in order to protect the environment and future generations.
1. Increasing inequality in wealth: As an economic system characterized by the private ownership of the means of production and distribution, there exists the obvious tendency for the increasing inequality in wealth. Because the entrepreneur has the advantage to manipulate the factors of production, especially labour and capital, as he considers best in order to achieve the highest measure of profit. By the end of the day, the capitalist receives a considerable portion of the profits that accrue to the business enterprise, while the labourers or working class, gets comparatively less reward for their efforts. This widens the gulf of economic inequality. However, with the increased recognition of collectively bargaining, this tendency is gradually being checked.
2. Goods and services that have high utility to the ordinary citizens are in short supply or non-existent: In a capitalistic economy profit is the motivation behind all productive endeavours. This way, productive scarce resources could be “wasted” on goods and services that serve no basic purposes, while other goods and services that have high utility to the ordinary citizens are in short supply or non-existent. For example, basic commodities such as pipe-borne water, regular electricity, effective health care, ands others.
3. Monopoly: Another defect of capitalism pertains to monopoly, this is a situation whereby there is only one producer of a commodity in a region or locality. For example, an employer may be the only purchaser in a locality, and if this happens, he would be in a strong position when negotiating rates to pay the individual members of the