FREE MARKET CAPITALIST ECONOMIC SYSTEM
Economic Systems Debate
Many economic systems have evolved over the years to deal with the three primary
economic questions: what to produce, how to produce it, and for whom to produce. This
week we have outlined several of those systems: traditional, command, free market, and
socialist systems. So which system is the “best?”
Roles:
 You and 1/3 of the class will be arguing that your economic system is the so-called
“best.” You will either be arguing for a free market capitalist system, a democratic
government-planned command system, or a mixed socialist system. If you do not
like the system you have been assigned you may trade with another student if you
can find one willing. You may also enjoy the challenge of arguing for a system that
you would not normally support. In any case, whatever system you end up arguing
for, even if it is not one you personally support, you need to support and argue for
your system strongly and with gusto.
Procedures:
 Read the arguments in favor of the economic system you are assigned.
 On your debate preparation notesheet, summarize IN YOUR OWN WORDS, the
most convincing arguments you have and/or other arguments you want to be sure to
bring up. Be sure to elaborate using specific examples to make your case.
 Read the arguments in support of the other competing economic systems. Again, on
your debate preparation notesheet, summarize the arguments IN YOUR OWN
WORDS, and explain in at least several sentences each how you plan to refute each
argument.
 Your completed debate preparation notesheet will be checked for completion and
stamped before the debate begins. For credit, have it completed BEFORE the debate
begins.
Grading:
 Each individual will be assessed based on the quality of your debate preparation
notesheet, your contribution to your group’s preparation, and your verbal
participation during the debate.
Summaries of Main Arguments
Option #1: Free Market Capitalism: The Path to Efficiency & Prosperity
While command and mixed economies may have some merits, free market capitalism is far and away the
best economic system. It is the most efficient, the most innovative, and the most enriching to its citizens.
The more the government interferes in the economy, the worse it is for the people.
 A capitalist economic system leads to higher economic growth rates and greater prosperity.
 A capitalist economic system rewards skill and effort.
 A free market economy provides efficiency, innovation, and consumer choice.
 While capitalism is at its foundation, built on what some may call selfish or egoistic principles
(self-interest), its consequences are generally much more humanitarian than that of a command or
socialist economy.
 Socialist and command economies are a threat to democracy and liberty.
Option #2: Command Economy: Equality, Stability, and Mutual Concern
The most effective of all economic systems would be a democratic command economy, with government
planning answerable to the people. Such a system would be more efficient, would maximize the social
welfare, and would eliminate the huge inequality of income and wealth one finds in a capitalist economy.
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A command economy, unlike a capitalist one, ensures jobs, health care, and education for all.
A command economic system brings stability, largely avoiding the boom and bust cycles caused by
a market economy.
A command economy is the only economic system that creates equality.
A command system prevents the dictatorship of money.
A command economy is the economic system that validates rather than demeans the dignity of the
individual.
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Option #3: Socialist/Mixed Economic System: The Only One That Gets the Right Balance
A socialist economy combines the dynamism of a free market economy with a government-run safety net
that is the best of all possible worlds. A free market system is efficient, but leads to insecurity and
inequality. A command system ensures equality and basic needs, at the cost of prosperity and freedom. A
socialist economy has the advantages of the two extremes while limiting the negatives.
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A socialist economic system differs from a command economy in that it addresses the need for
efficiency and wealth creation.
Mixed economies, unlike more free market capitalist ones, have a much better track record of
providing health care and education for their people.
A socialist economic system brings more stability and avoids the extreme levels of inequality found
in free market economies.
Actually, if one looks at it objectively, even the U.S. is largely a mixed economic system.
In the end, the extremes of a free market capitalist economic system and a command economic
system both fail.
Option #1: Free Market Capitalism:
The Path to Efficiency & Prosperity
While command and mixed economies have some merits, free market capitalism is far and away the best
economic system. It is the most efficient, the most innovative, and the most enriching to its citizens.
A capitalist economic system leads to higher economic growth rates and greater prosperity. One does not
have to be an expert economic historian to see that countries whose economic system has been nearer to
the free market model have grown much faster than those with a command economy since the Second
World War. The most successful economy in the world (in terms of size) has been the United States, and
it has been one of the freest economies in the world. For years under a command economic system, China
struggled to provide for the needs of its citizens. Over the last thirty years, by moving more toward a
socialist economy and allowing more aspects of a market system, the Chinese are becoming more able to
provide for citizens’ needs than ever before.
In a free market system, anyone with money and ideas can start their own company. Everyone from
massive corporations to a small business with just one employee can produce and sell products. The
market doesn’t judge you. It creates incentives to work hard and innovate, and opportunities for everyone
to grow. This creates a culture of progress and economic expansion that leads to a bigger, stronger
economy, and a better standard of living.
A capitalist economic system rewards skill and effort.
No matter where you start in life, under capitalism everyone has an opportunity to make it big. The basic
principle is that the harder you work, the greater your reward. This is true not just in the U.S., but
wherever a market system flourishes. For example, one man named Li Ka-shing, fled China in 1940 and
entered Hong Kong with next to nothing. His father having died, Li left school at the age of 14 and labored
16 hours every day in a plastics trading company, where his sheer hard work and attention to detail
allowed him to found Cheung Kong Industries in the 1950s, after which he never looked back. Li’s net
worth today is $26.5 billion. Capitalism works because to work for oneself and reap the rewards is a basic
human aspiration.
A free market economy provides consumer choice. Firms will produce whatever consumers are prepared
to buy. A great variety of consumer goods become available for those who have the money to buy them.
Remember that the consumer is sovereign. Due to the free enterprise factor, there are no restrictions on
what the firms can produce. It is of no surprise, therefore, that there will be a much larger choice of goods
and services in a free market economy compared with a command economy. The central planner in a
command economy will be more concerned with making sure there are enough essential goods to go
around rather than allocating resources efficiently between all goods.
A free market economic system leads to innovation. Firms will always be looking to produce something
new to sell and cheaper ways to do their work to get ahead of their competitors because it will lead to
profits. Capitalist countries have technological booms because the opportunities and incentives there
encourage creativity and outside-the-box thinking. When quality is rewarded, people work more happily
and feel inspired to do their best. What’s more, with a free market system, foreign investment is attracted
as word gets out about the new opportunities for earning profit.
Obviously there is no incentive for government planners to be innovative. As long as they produce the
essentials the planners will be happy.
Free market capitalism is efficient. Competition between different firms leads to increased efficiency, as
firms do whatever is necessary—including laying off workers—to lower their costs. What’s more, most
people work harder--the threat of losing one's job is a great motivator! It makes sense that free market
economies allocate their resources more efficiently. Decisions about what to produce are made by the
people who will actually consume the goods. Government planners are less likely to make the correct
decisions when making decisions for an entire economy.
Capitalism avoids the problems of shortage and surplus experienced by command systems. Government
planners usually have inadequate information about what to produce. They cannot detect consumer
preferences, shortages, and surpluses with sufficient accuracy and therefore cannot efficiently co-ordinate
production--in a market economy, a price system serves this purpose. For example, during certain periods
in the history of the Soviet Union, shortages were so common that one could wait hours in a line to buy
basic consumer products such as shoes or bread. These shortages were due in part to the central planners
deciding, for example, that making tractors was more important than making shoes at that time, or because
the commands were not given to supply the shoe factory with the right amount of leather, or because the
central planners had not given the shoe factories the incentive to produce the required quantity of shoes of
the required quality.
There is also the problem of surpluses (supply exceeding demand). Surpluses indicate a waste of labor and
materials that could have been applied to more pressing needs of society. Critics of central planning say
that a market economy prevents long-term surpluses because the operation of supply and demand causes
the price to sink when supply begins exceeding demand, indicating to producers to stop production or face
losses.
While capitalism is at its foundation, built on what some may call selfish or egoistic principles (selfinterest), its consequences are generally much more humanitarian than that of a command or socialist
economy. It might seem at first glance that everyone is selfishly working for their own money, but dig a
little deeper and it becomes apparent that every job has a benefit for someone else. As Adam Smith first
articulated, by every economic actor pursuing his/her own self-interest, the greatest abundance of material
wealth is produced, bringing about the highest good for society as a whole. As he wrote in The Wealth of
Nations, “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner,
but from their regard to their own interest.” Factory workers produce the products that we can’t live
without; hairdressers perform a service that benefits us, and the police work to protect us and make sure
we live in a lawful society. The bottom line is that no matter the job, highly or poorly paid, glamorous or
dirty, competitive or ‘easy’; everyone can have the satisfaction that they, as much as the well-known
public figures, are doing their bit for society.
Proponents of socialism or command systems may argue that their systems are much more humanitarian
and moral and provide the best for their citizens, but they can actually lower living standards of all by not
rewarding work and by making public assistance available to more than the neediest.
Socialist and command economies are a threat to democracy and liberty. A command economy creates
a very powerful government which limits individuals’ rights to pursue economic objectives. This
invariably creates a climate where governments can extend their control into other areas of people’s lives.
Not only that, but all those benefits received in socialist welfare countries have to be paid for somehow, by
taking your hard-earned money. While overall, the effective tax rate on Americans is around 25%, in
some socialist countries, the government takes 45% or more of your money in taxes. In addition, in recent
years socialist countries known for their generous social programs have been having an increasingly hard
time keeping their programs in tact because of the cost and have been actually cutting back.