<p>From a <strong>neoclassical perspective</strong>, its function is to allocate scarce resources efficiently, based on the <a href="https://en.wikipedia.org/wiki/Invisible_hand" rel="nofollow noreferrer">invisible hand</a> that make human selfishness work for the common good. Provided issues like externalities, public goods, etc are taking into account, every factor is paid its marginal product, <a href="https://en.wikipedia.org/wiki/Allocative_efficiency" rel="nofollow noreferrer">ensuring efficiency</a>.</p>

<p>From a <strong>Marxist perspective</strong>, its function is to serve the capitalist class by <a href="https://en.wikipedia.org/wiki/Exploitation_of_labour#Marxist_exploitation_theory" rel="nofollow noreferrer">exploiting the workers</a>, who are forced to sell their labour in the market receiving a pay below their actual contribution (because, according to the <a href="https://en.wikipedia.org/wiki/Labor_theory_of_value" rel="nofollow noreferrer">labour theory of value</a>, only labour produces value). The surplus is appropriated by the capitalists, who enjoy the benefits of the system.</p>

<p>In my opinion these <strong>highly polar views</strong> provide the basis with which other, more complex views can be compared.</p>

CC BY-SA 3.0
2017-08-08T06:19:56.847Z
2017-08-08T06:30:09.857Z
2017-08-08T06:30:09.857Z
luchonacho
<p>Capitalism is a historical form of organizing the social production, distribution and consumption of goods and services. This function shares capitalism with other forms organizing the economy of a society. But capitalism differs fundamental how this function is performed. The definition and the answers are describing some important aspects, but there are a lot more. One is that capitalism creates a great dynamic of development. The speed how the foundation of economic is changed is unique in human history. This is possible because the profit is used to improve the performance of the actors. This increase of performance is required because the competition would otherwise reduce the chance to survive on the market.</p>

<p>A lot of views are possible, so there will be no definitive answer on your question. It is to say that there is not one capitalism - there are capitalisms, each a little bit different but each is capitalism. And a human society is an very complex thing, so it is ever a simplification to say something with attribute A and B performs function C. So we should not forget - capitalism is also the story how we tell and explain us, what is a main part of our social reality.</p>

CC BY-SA 3.0
2017-08-16T23:34:00.953Z
2017-08-16T23:34:00.953Z
giftnuss
<p>Capitalism is defined as an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.</p>

<p>It functions as an <a href="https://en.wikipedia.org/wiki/Resource_allocation" rel="nofollow noreferrer">allocation mechanism</a> which generally yields the most optimal results under the <a href="https://en.wikipedia.org/wiki/Fundamental_theorems_of_welfare_economics" rel="nofollow noreferrer">Fundamental theorems of welfare economics</a> and prevents issues such as <a href="https://en.wikipedia.org/wiki/Tragedy_of_the_commons" rel="nofollow noreferrer">Tragedy of the commons</a> which a communist system would fail to deal with (unless all resources were heavily policed and regulated with knowledge of every consumers utility functions).</p>

<p>Under a pure capitalist system, government intervention in the market place is viewed as harmful.</p>

<p>However according to mainstream economic theory, there is some benefit to have from government intervention when dealing with <a href="http://www.investopedia.com/terms/e/externality.asp" rel="nofollow noreferrer"> externalities</a>, <a href="https://en.wikipedia.org/wiki/Market_saturation" rel="nofollow noreferrer">market saturation</a> and responding to <a href="https://en.wikipedia.org/wiki/Business_cycle" rel="nofollow noreferrer">Business Cycles</a>. </p>

CC BY-SA 3.0
2017-08-16T15:40:32.130Z
2017-08-16T15:40:32.130Z
EconJohn
<p>To my understanding, all systems have a function.  For instance, the function of the respiratory system is to supply oxygen to the body.  The function of the digestive system is to break down and disseminate nutrients.  The function of a mass transit system is to facilitate large scale public transport.  </p>

<p>Capitalism is defined in Merriam-Webster as, </p>

<blockquote>
  <p>an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market</p>
</blockquote>

<p>So clearly, capitalism is a system, but I can't glean from that definition its purpose.</p>

<p><em>What would most economists consider the function of capitalism?</em></p>

<p>Please be clear to separate, if you will, this system's function from the functions of other economic systems in your answer.</p>

CC BY-SA 3.0
2017-08-08T04:00:27.200Z
You're asking about the function of it as a resource allocation mechanism/political economy?
EconJohn
CC BY-SA 3.0
2017-08-08T09:54:28.523Z
Not everything you can affix the word system to has a purpose or function. What is the purpose of a planetary system? What is the purpose of a weather system? Free market economic systems is just a name for the decentralized exchange of goods and services. You can ascribe all kinds of meanings to the set of human behaviors or outcomes associated with such a system, but that doesn't make them inherent to the system. It's still just, like, your opinion, man.
Tobias
CC BY-SA 3.0
2017-08-09T10:00:59.347Z
You ask a very general and legitimate question but for this site I admit that it is way to much broad. To sum up very quickly, capitalist system aims to allocate all resources (mine, forests, oil, everything you can imagine to produce something) in the most efficient way. This is why neoclassical economists are always "maximizing" something or "minimizing" the cost of something. To understand the basic difference with capitalism and marxism, you can look at the idea of "marginalism" (marginal cost) and "average value", average cost. Look at the mathematical economics in Soviet Union
optimal control
<capitalism>
What is the function of capitalism?
Jonesn11
# What is the function of capitalism?

(Asked by: username_0 on 2017-08-08)

To my understanding, all systems have a function. For instance, the function of the respiratory system is to supply oxygen to the body. The function of the digestive system is to break down and disseminate nutrients. The function of a mass transit system is to facilitate large scale public transport.

Capitalism is defined in Merriam-Webster as,

> an economic system characterized by private or corporate ownership of capital goods, by investments that are determined by private decision, and by prices, production, and the distribution of goods that are determined mainly by competition in a free market

So clearly, capitalism is a system, but I can't glean from that definition its purpose.

*What would most economists consider the function of capitalism?*

Please be clear to separate, if you will, this system's function from the functions of other economic systems in your answer.

**Tags:** capitalism

> **Comments:**
> **username_1**: You're asking about the function of it as a resource allocation mechanism/political economy?  
> **username_2**: Not everything you can affix the word system to has a purpose or function. What is the purpose of a planetary system? What is the purpose of a weather system? Free market economic systems is just a name for the decentralized exchange of goods and services. You can ascribe all kinds of meanings to the set of human behaviors or outcomes associated with such a system, but that doesn't make them inherent to the system. It's still just, like, your opinion, man.  
> **username_3**: You ask a very general and legitimate question but for this site I admit that it is way to much broad. To sum up very quickly, capitalist system aims to allocate all resources (mine, forests, oil, everything you can imagine to produce something) in the most efficient way. This is why neoclassical economists are always "maximizing" something or "minimizing" the cost of something. To understand the basic difference with capitalism and marxism, you can look at the idea of "marginalism" (marginal cost) and "average value", average cost. Look at the mathematical economics in Soviet Union  

---

## 3 answers

### Answer by username_1 on 2017-08-16. Score: 4 | Accepted answer

Capitalism is defined as an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

It functions as an [allocation mechanism](https://en.wikipedia.org/wiki/Resource_allocation) which generally yields the most optimal results under the [Fundamental theorems of welfare economics](https://en.wikipedia.org/wiki/Fundamental_theorems_of_welfare_economics) and prevents issues such as [Tragedy of the commons](https://en.wikipedia.org/wiki/Tragedy_of_the_commons) which a communist system would fail to deal with (unless all resources were heavily policed and regulated with knowledge of every consumers utility functions).

Under a pure capitalist system, government intervention in the market place is viewed as harmful.

However according to mainstream economic theory, there is some benefit to have from government intervention when dealing with  [externalities](http://www.investopedia.com/terms/e/externality.asp), [market saturation](https://en.wikipedia.org/wiki/Market_saturation) and responding to [Business Cycles](https://en.wikipedia.org/wiki/Business_cycle).


---

### Answer by username_4 on 2017-08-08. Score: 3

From a **neoclassical perspective**, its function is to allocate scarce resources efficiently, based on the [invisible hand](https://en.wikipedia.org/wiki/Invisible_hand) that make human selfishness work for the common good. Provided issues like externalities, public goods, etc are taking into account, every factor is paid its marginal product, [ensuring efficiency](https://en.wikipedia.org/wiki/Allocative_efficiency).

From a **Marxist perspective**, its function is to serve the capitalist class by [exploiting the workers](https://en.wikipedia.org/wiki/Exploitation_of_labour#Marxist_exploitation_theory), who are forced to sell their labour in the market receiving a pay below their actual contribution (because, according to the [labour theory of value](https://en.wikipedia.org/wiki/Labor_theory_of_value), only labour produces value). The surplus is appropriated by the capitalists, who enjoy the benefits of the system.

In my opinion these **highly polar views** provide the basis with which other, more complex views can be compared.


---

### Answer by username_5 on 2017-08-16. Score: 1

Capitalism is a historical form of organizing the social production, distribution and consumption of goods and services. This function shares capitalism with other forms organizing the economy of a society. But capitalism differs fundamental how this function is performed. The definition and the answers are describing some important aspects, but there are a lot more. One is that capitalism creates a great dynamic of development. The speed how the foundation of economic is changed is unique in human history. This is possible because the profit is used to improve the performance of the actors. This increase of performance is required because the competition would otherwise reduce the chance to survive on the market.

A lot of views are possible, so there will be no definitive answer on your question. It is to say that there is not one capitalism - there are capitalisms, each a little bit different but each is capitalism. And a human society is an very complex thing, so it is ever a simplification to say something with attribute A and B performs function C. So we should not forget - capitalism is also the story how we tell and explain us, what is a main part of our social reality.


---

