Sociology

Sociology Study Guide

if public ownership is kept at a minimum. Socialists argue that private ownership results in exploitation. Capitalism Capitalism is an economic system in which the means of production are privately owned and distributed competitively in the hopes of making a profit. In a capitalist society, it is expected that owners will attempt to make a profit. It is also assumed that supply and demand will dictate what is produced and for how much. Capitalism rests on the tenets that competition will keep prices reasonable and will put out of business those producers who are ineffective. The three key elements of capitalism, then, are: • Private property ownership • Profit • Competition The drawbacks of capitalism are: • Inflation (increasing cost of goods and services) • Social inequality (those who own and those who do not) • Large poverty class (those who have can succeed, but possibly not those who don’t) • Unemployment (a continual need) • Stagflation (unemployment combined with inflation) Socialism An alternative to capitalism, socialism is based on Karl Marx’s writings. It is an economic systemin which the means of production are controlled and distributed by the state. Prices are set by the government for goods and services. A socialist economy aims to efficiently produce needed goodsand services and achieve social equality by preventing individual wealth. The central reasoning behind socialism is the belief that no one should become rich if someone else must do without necessities. Therefore, the most important priority of socialism is to meet the basic needsof the entire population. Mixed Economies A mixed economy uses the central elements of free enterprise (from capitalism) with state-operated services (from socialism). The aim is to control unrestrained capitalism and provide for some distribution of goods and services on the basis of “right” rather than ability to afford. These systems are sometimes referred to as democratic socialism.

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