ECON Paper

Topics: Capitalism, Socialism, Free market Pages: 6 (1506 words) Published: October 7, 2014
Sydney Bouma
Econ 2103
Free to Choose
Socialism and capitalism are two opposing schools of thought when dealing with the economy. Each plays a role, but different ones. For example capitalism operates as a system of checks and balances through voluntary exchange, while socialism allows the government to hold the power and to choose that what is right for one is essentially right for all. In the book “Free to Choose” authors Milton and Rose Friedman discuss these two opposing views in depth and argue from a capitalist standpoint. While they believe that some government provision is necessary, they believe competition and opportunity are essential in running a successful economy. After reading their book, I too argue from the same point of view.

In chapter one Friedman talks about “choice” and how significant choices are in our lives. From deciding how to use our resources, to where one chooses to dwell, life is all about choices. Having an economy based on capitalism I strongly feel would be best. It allows individuals to be “free to choose” and prevents the government from intervening. The government should level the playing field but should not call all of the shots. Although there are pros and cons to capitalism, I feel the pros outweigh the cons. One pro is that capitalism allows individuals to make their own decisions and also creates incentives to work hard. For example, if one chooses to work hard that may result in a higher income, therefore the higher income is an incentive to put forth more effort. In my opinion our generation seems to be becoming lazier, and hard workers are valuable to the workplace and also hard to find. Now, if we live in an economy that is based on socialism and the government holds the power to decide how wealth is distributed, would one want to work hard? Why be wealthy if our money is in the hands of the government?

In addition to the increased wealth created by capitalism, economic growth and efficiency are two other advantages in this school of thought. Having wealthier people and harder workers leads to improving our standard of living. Those who own capital can compete with others to provide goods and services to the marketplace and to readily compete with others one must be efficient with productions. Being efficient helps to minimize waste and labor cost, which also pressures firms and owners to be more innovative.

Although there are significant advantages to a free market economy, there are also a few downsides. One downside includes the neglect of social benefit. We’re talking health insurance, public transportation, and education. “A free market economy will under-provide goods with positive externalities which can lead to an inefficient allocation of resources.” (Pettinger, 2) In other words, without a little provision from the government a capitalist society will ignore the importance of tax dollars and the impact they have on our society. In order for one individual to get ahead often they forget about helping the others in need such as those who cannot afford health care, and kids who attend public schools. A second downside to capitalism can be competition. Competition can become so fierce that monopolies begin to form and power is unequal among competitors. When that happens one can expect a firm to capitalize on that power and charge higher prices to its consumers. Without price control that typically happens in a socialist economy, firms can and will take advantage of increasing prices on their products. On the opposing side of the economy lies socialism. Socialism is the thought that what is good for one is good for all. Instead of capitalizing on making money, socialism focuses on benefiting our society as a whole. It sounds almost too good to be true. In a socialist economy the power lies in the hands of our government. The government owns essentially everything. In my opinion, I just don’t want to instill that much trust into the government with what...

Cited: Friedman, Milton, and Rose D. Friedman. Free to Choose: A Personal Statement. New York: Harcourt Brace Jovanovich, 1980. Print.
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