Capitalism: A Comparative Analysis of Classical and Neoclassical Theories and a Case Study of China

Running head: ECONOMICS ASSIGNMENT
Economics Assignment
Name of the Student
Name of the University
Author Note

1ECONOMICS ASSIGNMENT
Introduction
The global economic scenario is a diversified framework with different countries
showing different economic as well as socio-political trends. These social, political,
economic and demographic aspects play considerably important roles in determining the
shape of the economy of a country, thereby determining different aspects like the overall
welfare of the population, the prosperity of the concerned country, its relation with the other
countries in the global framework as well as the significance and magnitude of importance of
the governing bodies of the countries (Holland 2018).
Keeping this into account, different types of economic and political systems and
frameworks have developed over the years and have been implemented and have also been in
operation in different countries, at different points of time, yielding diverse outcomes for the
countries and their populations. One of such political and socio-economic structure found to
be present in the contemporary global scenario is that of Capitalism (Levi-Faur 2017). In the
generalised framework, Capitalism can be defined as the socio-political and economic
framework, in which the industries and commercial aspects of a country are profit driven and
by the private sectors, with less roles of the state or the governing authorities. However, the
notion of Capitalism can be seen to be varying according to different schools of thought.
Taking this into account, the concerned essay tries to discuss the notions and concepts
regarding Capitalism, which can be seen to be present in the two eminent schools of thoughts
in economics- the Classical theory and the Neo-Classical theory, thereby discussing the
similarities and the differences between the notions of Capitalism present in the domain of
these schools of thoughts. Incorporating this, the essay also tries shed light on the structure
and nature of Capitalism present in one of the predominant economies, the economy of
China.

2ECONOMICS ASSIGNMENT
Capitalism: Definition and Implications
In terms of economics, any commodity or service is produced with the help of four
factors of production, which are land, labour, capital and entrepreneurship. The ownership of
these factors and the nature of their usage varies according to the types of socio-economic
and political system prevailing in the country (Tawney 2017). In this context, Capitalism is
that economic system, in which all the factors of production mentioned above, are owned by
the private entities or individuals. In this construct, the individuals, who are the owners of the
productive resources have their own profit maximizing incentives.
The primary features of Capitalistic framework are as follows:
In this type of socio-economic structure, the owners of the productive factors are the
ones who control the same and their usage. The owners of the productive factors derive their
income from the ownership of the same and are also profit maximisers. Capitalism operates
in a free market economy, where efficiency and profit maximisation are given more
importance than that of equity aspects (Dirlik 2018). In the capitalistic framework of an
economy, the supply of commodities and services are directly linked to the profit prospects of
the owners of factors of production in producing the same and those competitors which
produce the products more cost effectively and efficiently stay in the market while the
inefficient ones eventually need to exit from the market.
Pros and Cons of Capitalism
Capitalism, like any other socio-economic construct, has its advantages as well as
disadvantages. In this construct, best products can be seen to be available for best prices
which increases the benefit of the customers. Capitalism also has an intrinsic reward for
innovations and efficiency increasing productive technologies (Bowles and Gintis 2012).