<p>Though there may not be a set definition of &quot;capitalism&quot; chisled in stone somewhere, there are general principles that economists agree are implied in capitalism and that capitalism implies.</p>
<p>Take, for example, the two below definitions of &quot;capitalism&quot;:</p>
<blockquote>
<p>[A]n 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 -- <a href="https://www.merriam-webster.com/dictionary/capitalism" rel="noreferrer">Merriam-Webster Dictionary</a></p>
<p>Capitalism is an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market—known as a market economy—rather than through central planning—known as a planned economy or command economy. -- <a href="https://www.investopedia.com/terms/c/capitalism.asp" rel="noreferrer">Investopedia</a></p>
</blockquote>
<p>Both definitions provide two elements necessary for &quot;capitalism&quot;:
(1) private individual / corporate business ownership of capital goods and
(2) private decisions based on the given market's supply and demand curves (and the factors influencing those curves).</p>

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2019-06-25T15:13:06.080Z
I like this answer (because it starts by saying there is no set definition), but I feel it dances around the main issue a bit: what level of state involvement (or ownership of the means of production) can you have in an economy and still call it capitalism? E.g. there is some contrast between your answer and [this one](https://economics.stackexchange.com/questions/20610/what-metrics-can-be-used-to-distinguish-between-capitalistic-and-socialistic-eco).
Giskard
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2019-06-25T16:44:33.843Z
@Giskard I believe that is a different question from the original one, but it goes back to not having a "set" definition. Like any word/phrase, a definition details the "if and only if" points. "Capitalism" is a broad term with only the 2 parameters of private ownership and private decisions. For more precise information on the level of state involvement, we need to use the sub-definitions of "capitalism" (i.e. definitions for crony capitalism, state capitalism, etc.). However, the above definition seems to allow any state involvement as long as private ownership and decisions are allowed.
Mathematician
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Mathematician
<p>The dictionary definitions of capitalism (currently the most upvoted answer) have been critiqued as inadequate, in the sense that they are too broad, by Geoffrey Hodgson in his treatise, <em>Conceptualising Capitalism</em> (University of Chicago Press, 2015).</p>

<blockquote>
  <p>Definitions proliferate. Most dictionaries stress private
  ownership and markets; many add the profit motive. The entry in The
   New Encyclopaedia Britannica (1998, 2:831) is typical: “Capitalism, also
  called free market economy, or free enterprise economy: economic system
  . . . in which most of the means of production are privately owned
  and production is guided and income distributed largely through the operation
  of markets.”</p>
  
  <p>But, if we consider systems based largely on private ownership, the
  profit motive, and markets, we can find many examples before the medieval
  era. [...] trade has existed for tens of
  thousands of years, markets may have appeared as long as five millennia
  ago in China, and they were evident in several locations in the eastern
  Mediterranean and the Middle East around 600 BC. Private ownership,
  the pecuniary calculus, and the profit motive have similarly played
  a prominent role in leading economic regions for thousands of years.
  Hence, prominent dictionary definitions of capitalism make it a system
  that has lasted for multiple millennia. If we adopt such definitions, then
  we need to find another word to describe the institutional structures that
  were consolidated in the eighteenth century and gave rise to spectacular
  economic growth and ongoing technological innovation.</p>
</blockquote>

<p>And he does have his own definition (which I will not try to argue that is mainstream); its premise is that: </p>

<blockquote>
  <p>Capitalism [...] requires special forms of state that cannot confiscate property arbitrarily at will, that are effectively restrained by laws, that have internal
  checks and balances, and that are faced with countervailing (democratic
  or other) powers that help protect a relatively autonomous legal system.
  Such states are necessary to legitimate and protect property rights and
  to enforce contracts. They required peculiar circumstances and a long
  time to evolve. Foreshadowed in the Italian city- states, they did not appear
  on a national scale until the seventeenth century, in Britain and the
  Netherlands. [...]</p>
  
  <p>I argue that, while markets are central to capitalism, capitalism is not
  simply a market system: unavoidably it contains different subsystems of
  governance, production, distribution, and exchange. Furthermore, capitalism
  cannot in principle have markets for everything or bring everything
  within the orbit of commodity exchange.
  In particular, under capitalism there can never be a complete set of
  markets for future labor power. For there to be full futures markets for
  labor, all workers must enter into contracts for their expected working
  life. This would be tantamount to voluntary bondage, limiting the freedom
  of workers to quit their employment. Paradoxically, pushing markets
  to their limits would mean the return of slavery for the workforce.</p>
</blockquote>

<p>He goes on to semi-formalize a list of tenets that constitute capitalism first according to [his interpretation of] Marx and then similarly for Schumpeter</p>

<blockquote>
  <p>M[arx]-capitalism</p>
  
  <ol>
  <li>A legal system supporting widespread individual rights and liberties to own,
  buy, and sell private property</li>
  <li>Widespread commodity exchange and markets involving money</li>
  <li>Widespread private ownership of the means of production by firms producing
  goods or services for sale in the pursuit of profit</li>
  <li>Much of production organized separately and apart from the home and
  family</li>
  <li>Widespread wage labor and employment contracts</li>
  </ol>
  
  <p>Most dictionary and encyclopedia definitions emphasize conditions
  (1), (2), and (3), albeit often without emphasis on the legal system. More
  than Marx, the notion of M-capitalism emphasizes the legal system and
  individual rights. Regarding condition (4), the separation of much production
  from the family and the domestic sphere was emphasized by Weber
  (1968) and is implicit in Marx’s writings. Weber rightly argued that
  this separation was important to subject production to systems of rational
  accounting and pecuniary motivation. Marx emphasized condition
  (5) because it flows from the nature of capitalism as generalized commodity
  production and encapsulates the driving antagonism between
  the employing class and the working class. [...]</p>
  
  <p>A problem [...] is that the addition of
  condition (5), widespread wage labor, to the preceding four does not effectively
  demarcate modern industrial capitalism from the four preceding
  centuries when wage labor was widespread in rural England.
  M-capitalism, as specified above, gives us a better-than-average definition,
  but not one that is sufficiently sharp in terms of historical specificity.</p>
  
  <p>Further problems of historical demarcation arise with the first four
  conditions. As noted in section 4.4 above, the idea that secure property
  rights were first established in England in the seventeenth century is a
  myth. Furthermore, money, markets, and private ownership have existed
  for millennia. The fourth condition is helpful but hardly sufficient as an
  explanation of massive expansion of capitalism around 1800. The five
  conditions are inadequate to demarcate historically the explosion of capitalist
  productivity even if they are necessary for that system.</p>
</blockquote>

<p>As for S[chumpeter]-capitalism, he argues that it contains all of the above, except for #5, but that additionally it has</p>

<blockquote>
  <ol start="6">
  <li>A developed financial system with banking institutions, the widespread use
  of credit with property as collateral, and the selling of debt</li>
  </ol>
  
  <p>The addition of condition (6) takes seriously the monetary definition
  of capital and institutions promoting collateralization and the salability
  of debt. Capitalism is thus marked by “the predominance of ‘capital’”
  (Sombart 1930, 196). This definition points to the development of institutions
  of clearer historical specificity. According to this definition, the
  emergence of capitalism in England is marked by developments in financial
  institutions in the eighteenth century.</p>
  
  <p>Note that condition (1) in the definitions of M-capitalism and
  S-capitalism rules out (at least widespread) slavery. Consequently, both
  M-capitalism and S-capitalism involve missing futures markets for labor.
  With S-capitalism, there may be self-employment or worker cooperatives
  but not extensive slave labor. M-capitalism rules out an economy
  with predominant self- employment or worker cooperatives.</p>
</blockquote>

<p>As you can probably guess, by synthesis, he argues that the definition of capitalism should include the superset of 1-6 from both M- and S-capitalism (which already have a lot in common).</p>

<blockquote>
  <p>But there is a cost to the exclusion of condition (5) from this definition. [...] the advantage of retaining
  the employment contract in the definition of capitalism is that it demarcates
  the system from economies involving self-employed producers or
  worker cooperatives. Furthermore, the introduction of wage labor gave
  important incentives for labor-saving innovations and led to increases in
  productivity. Consequently, the definition of capitalism that is favored
  here— and described simply as capitalism, without any prefix— involves
  all six of the above conditions. [...] </p>
  
  <p>Conditions
  (5) and (6) serve as fuzzy historical bookends, together demarcating
  capitalism from preceding systems and possible successors. [...]</p>
  
  <p>Explicit reference to social class is also absent from the definition offered
  above. In his review of different definitions of capitalism, Michael
  Merrill (1995) argued that capitalism is much more than simply a market
  economy. He was right about that. But he wanted to define capitalism as
  “a market economy ruled by, or in the interests of, capitalists” (322). A
  problem [...] is that the basis of class itself has to
  be defined, and Marx and Engels were obliged to use legal terms such as
  ownership to do so. Being a capitalist or a worker is not a congenital attribute:
  it is the occupation of a social role that is determined in part by
  legal relations. Class-related legal terms appear in all points above, except
  condition (4).</p>
  
  <p>Marxists have abused class-centered definitions of capitalism. They
  see class struggle, where the destiny of one class is to seize control of the system from another. But, notwithstanding the power of capitalists over
  workers, capitalists do not control capitalism: it is more the other way
  round. Such large and complex systems cannot be fully controlled, as if
  from a single chamber of power.</p>
</blockquote>

<p>And while he disses that idea that capitalists control capitalism itself as a caricature, he nevertheless argues that it is an integrated economic and political system (and in this he is not that original, as he acknowledges):</p>

<blockquote>
  <p>The central role of the state within capitalism means that we must
  address politics as well as economics. [...] Douglass C. North, John J. Wallis,
  and Barry R. Weingast (2009, 269) argued: “The seeming independence
  of the economic and political systems on the surface is apparent, not
  real. In fact, these systems are deeply intertwined.” I also concur with
  Bruce R. Scott (2009, 4) in his claim that capitalism is both “a political
  phenomenon” and “an economic one” and that “specifically it requires
  the visible hands of political actors exercising power through political
  institutions.” Capitalism always involves legal and political institutions:
  pure “anarchocapitalism” is an unrealizable fantasy.</p>
</blockquote>

<p>And since the Austrians (Hayek actually) got mentioned in the question, Hodgson has this to say about their approach to defining capitalism:</p>

<blockquote>
  <p>The Austrian economists had
  little to say about the sphere of production—conditions (4) and (5)—
  including the employment contract. Although they mentioned money
  many times, they paid insufficient attention to the use of property as collateral
  or to the selling of debt—condition (6). Their theory of money
  downplays the vital constitutive role of the state. At best, they stressed
  three of the six conditions only. The first three conditions are insufficient to identify the institutions of the capitalist system that were responsible
  for the explosive production of wealth in the last three hundred
  years.</p>
</blockquote>

<p>While this may not be any sort of consensus statement, it is at least a comparative analysis of various definitions (from fairly prominent sources).</p>

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fantastic peace and prosperity
<p><a href="https://www.core-econ.org/" rel="nofollow noreferrer">CORE</a> is an open-access economics course put together by a group of experts (including colleagues of mine).</p>

<p><a href="https://core-econ.org/the-economy/book/text/01.html#17-capitalism-as-an-economic-system" rel="nofollow noreferrer">This page</a> covers their definition of a capitalist system. From there, this figure 1.8 visualises one aspect of it:
<a href="https://i.sstatic.net/DnEd4.jpg" rel="nofollow noreferrer"><img src="https://i.sstatic.net/DnEd4.jpg" alt="enter image description here"></a></p>

<p>They go on to say:</p>

<blockquote>
  <p>The distinctive hallmark of the capitalist economic system is the
  private ownership(1) of capital goods(2) that are organized for use in
  firms. Other economic systems are distinctive because of the
  importance of privately owned land, the presence of slaves, because
  the government owns capital goods, or because of the limited role of
  firms. Capitalist economies differ, too, from earlier economies in the
  magnitude of the capital goods used in production. Massive power looms
  have replaced spinning wheels; a tractor now pulls a plough to do a
  job once done by a farmer using a hoe.</p>
  
  <p>Capitalism is an economic system that combines centralization with
  decentralization. It concentrates power in the hands of owners and
  managers of firms who are then able to secure the cooperation of large
  numbers of employees in the production process. But it limits the
  powers of owners and of other individuals, because they face
  competition to buy and sell in markets.</p>
  
  <p>(1) the right to use and exclude others from the use of something, and
  the right to sell the thing that is owned</p>
  
  <p>(2) The equipment, buildings, and other durable inputs used in
  producing goods and services, including where applicable any patents
  or other intellectual property that is used</p>
</blockquote>

CC BY-SA 4.0
2019-09-11T17:14:34.357Z
This definition is too broad/vague. It could be applied to economies before the era of Adam Smith et al.
Geremia
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2019-09-14T03:26:21.107Z
I'm not convinced most economists would agree that firms are needed for capitalism. The figure seems to conflate some issues... i.e. it seems to define what others call corporate capitalism.
fantastic peace and prosperity
CC BY-SA 4.0
2019-09-14T03:55:16.253Z
See for example https://www.jstor.org/stable/4177297 which contrasts "classical capitalism" with "corporate capitalism".  The latter is "based on a diffused private property regime.
The great corporation supersedes the small family company. Its ownership
is structured in the form of a joint stock company with a dispersed
shareholding, while internal control is implemented through huge and
complex hierarchies of command." [continues]
fantastic peace and prosperity
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2019-09-14T03:56:44.383Z
"The firm is no longer a thing that
belongs to a person or a group of persons endowed with residual
control. Rather, it is itself a person, i.e. a social entity with a legal personality,
able to enter into contracts and transactions with all the other social
actors (Iwai, 1997). The entrepreneurs are managers who act as both
agents of the shareholders and functionaries of the company. Their objective,
in the former role, is the value of the firm, in the latter, company
growth. In principle there is no contradiction between the two goals [...]"
fantastic peace and prosperity
CC BY-SA 4.0
2019-09-14T04:24:30.303Z
Alternatively, corporate capitalism is called "managerial capitalism" https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100129827?rskey=NfaMcF&result=42
fantastic peace and prosperity
CC BY-SA 4.0
2019-09-14T11:30:05.060Z
Other authors like  Hodgson do exthort the corporation as core feature of capitalism as we know it. (So you have my upvote) Also, Hodgson (see my answer for more details) tries to differentiate between capitalism as a post-18th century system and broader definitions that cover [parts of] lots of other systems. So the CORE textbook is probably trying to do this too, although it isn't as explicit.
fantastic peace and prosperity
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2019-09-11T07:32:13.553Z
2019-09-11T07:32:13.553Z
410 gone
<p>While &quot;economics&quot; doesn't have a definition, what I find most important is recognizing that there are at least 2 substantially different definitions of capitalism in wide circulation. Clarifying (or simply avoiding the use of the word entirely) is often critically important to having productive discussions.</p>
<ol>
<li><p>Captialism when spoken by advocates of it generally means &quot;a system of market economics where property rights are secure and the action of private individuals determines what happens in the market.&quot;</p>
</li>
<li><p>Capitalism when spoken by detractors of it generally means the same as &quot;cronyism&quot;. I might define it as &quot;a system where those who control most of the capital are given or take political advantage.&quot;</p>
</li>
</ol>
<p>There are similarly two different primary meanings for &quot;socialism&quot;:</p>
<ol>
<li><p>Socialism when spoken by advocates of it generally mean &quot;a system where the welfare of the common person is respected and given fair treatment, often involving government social safety nets of various kinds&quot;</p>
</li>
<li><p>Socialism when spoken by detractors of it generally means &quot;a system where the government controls production of goods and services&quot;</p>
</li>
</ol>
<p>One simply can't have a productive conversation across the aisle without understanding both of these definitions and how to avoid confusion around them. My method is usually to talk about command economies vs market economies and make sure to distinguish cronyism as a separate thing.</p>

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2023-10-03T03:22:21.503Z
You seem to not realize that words very often have *multiple* definitions. The answer is not always to consult a dictionary and find the "one true definition", especially when there isn't one.
B T
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2023-08-30T19:00:54.420Z
2023-08-30T19:00:54.420Z
B T
<p>Capitalism is</p>
<ol>
<li><a href="https://economics.stackexchange.com/q/11358/4101">considering money capital</a>, i.e., considering money itself productive</li>
<li>&quot;<em>control over economic life in the name of the unrestricted and unlimited acquisitive interests of those who own capital.</em>&quot; (Heinrich Pesch, S.J., <a href="https://isidore.co/calibre/#panel=book_details&amp;book_id=5322" rel="nofollow noreferrer"><em>Ethics and the National Economy</em></a> p. 159; cf. <a href="https://economics.stackexchange.com/a/31833/4101">these quotes</a> from it)</li>
<li>&quot;state-sponsored usury&quot; (<a href="https://culturewars.com/" rel="nofollow noreferrer">E. Michael Jones</a>, <em><a href="https://isidore.co/calibre/#panel=book_details&amp;book_id=7459" rel="nofollow noreferrer">Barren Metal: A History of Capitalism as the Conflict Between Labor and Usury</a></em>)</li>
<li>&quot;means of production […] being concentrated in the hands of a few owners&quot; (<a href="https://distributistreview.com/archive/an-introduction-to-distributism" rel="nofollow noreferrer">John Médaille</a>)</li>
<li>a &quot;dictatorship&quot; of &quot;those who, since they hold the money and completely control it, control credit also and rule the lending of money&quot; and &quot;regulate the flow, so to speak, of the life-blood whereby the entire economic system lives&quot; (Pius XI, <a href="https://w2.vatican.va/content/pius-xi/en/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno.html" rel="nofollow noreferrer"><em>Quadragesimo Anno</em></a> §106)</li>
<li>Austin Woodbury, S.M., <a href="https://isidore.co/calibre#panel=book_details&amp;book_id=9247" rel="nofollow noreferrer"><em>True and False Capitalism: A Catholic Analysis</em></a>, § Forms of Investment: &quot;capitalism is nothing else than the name for the act of investment.&quot; He distinguishes 2 types:
<ol>
<li>natural capitalism (investing in productive goods)</li>
<li>spurious capitalism (investing in order to impede production; e.g., a competitor buying his competition in order to form a monopoly)</li>
</ol>
</li>
<li>Julio Meinvielle, <a href="https://isidore.co/calibre/#panel=book_details&amp;book_id=9839" rel="nofollow noreferrer"><em>Concepción católica de la economía</em></a>, p. 5:<blockquote>an economic system that seeks the unlimited growth of gain through the application of mechanistic economic laws.<hr><sup><em>un sistema económico que busca el acrecentamiento ilimitado de la ganancia por la aplicación de leyes económicas mecánicas.</em></sup></blockquote></li>
</ol>

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2019-09-11T05:01:37.330Z
Except for the first one, these all seem like disparaging comments rather than exact definitions.
Giskard
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2019-09-11T17:15:17.703Z
@Giskard These definitions distinguish capitalism from other market economies such as those that existed before Adam Smith's era.
Geremia
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2019-09-11T18:01:38.473Z
@Giskard Also, why is #1 not disparaging?
Geremia
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2019-09-11T19:39:18.503Z
Good point! However, in most (objective) intertemporal models there is good reason to assume that money/wealth/savings may be productive.
Giskard
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Geremia
<p>Does the discipline of economics have an accepted rigorous definition of capitalism?
<br> I.e. not something like "<em>some economists would quote Hayek and say that so and so constitutes capitalism</em>" but an <strong>if and only if</strong> definition that most economists would agree on.</p>

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2018-01-01T01:37:54.050Z
Private ownership of the means of production. I'm not sure that satisfies your standards of rigor though.
Michael Greinecker
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2018-01-01T01:43:20.970Z
@MichaelGreinecker I am afraid it does not. (What is the difference between [state capitalism](https://en.wikipedia.org/wiki/State_capitalism) and communism/[planned economy](https://en.wikiquote.org/wiki/Planned_economy) with this definition?) I would also insist on a source.
Giskard
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2018-01-01T01:49:09.527Z
[Oooooooooooops](https://economics.stackexchange.com/questions/16699/what-are-the-defining-features-of-capitalism?rq=1)
Giskard
CC BY-SA 3.0
2018-01-01T01:51:20.900Z
To those who closed Luchanacho's question and would perhaps also endeavour to close this one I'd like to point out that the capitalism tag has 11 questions, most of which use the word capitalism without any explanation. IMO either those questions are all unclear or Luchanacho's and mine are not too broad. (Mine will be a duplicate if we agree to reopen the other one, which is fine.)
Giskard
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2018-01-02T03:33:33.657Z
Would vote to close, however that would mean that I close the question unanimously
EconJohn
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2018-01-02T08:56:16.990Z
@EconJohn And your reasoning for closing this question?
Giskard
<definition><capitalism>
Definition of capitalism
Giskard
# Definition of capitalism

(Asked by: username_0 on 2018-01-01)

Does the discipline of economics have an accepted rigorous definition of capitalism?
  
 I.e. not something like "*some economists would quote Hayek and say that so and so constitutes capitalism*" but an **if and only if** definition that most economists would agree on.

**Tags:** definition, capitalism

> **Comments:**
> **username_1**: Private ownership of the means of production. I'm not sure that satisfies your standards of rigor though.  
> **username_0**: @MichaelGreinecker I am afraid it does not. (What is the difference between [state capitalism](https://en.wikipedia.org/wiki/State_capitalism) and communism/[planned economy](https://en.wikiquote.org/wiki/Planned_economy) with this definition?) I would also insist on a source.  
> **username_0**: [Oooooooooooops](https://economics.stackexchange.com/questions/16699/what-are-the-defining-features-of-capitalism?rq=1)  
> **username_0**: To those who closed Luchanacho's question and would perhaps also endeavour to close this one I'd like to point out that the capitalism tag has 11 questions, most of which use the word capitalism without any explanation. IMO either those questions are all unclear or Luchanacho's and mine are not too broad. (Mine will be a duplicate if we agree to reopen the other one, which is fine.)  
> **username_2**: Would vote to close, however that would mean that I close the question unanimously  
> **username_0**: @username_2 And your reasoning for closing this question?  

---

## 5 answers

### Answer by username_3 on 2019-06-25. Score: 6

Though there may not be a set definition of "capitalism" chisled in stone somewhere, there are general principles that economists agree are implied in capitalism and that capitalism implies.

Take, for example, the two below definitions of "capitalism":

> [A]n 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 -- [Merriam-Webster Dictionary](https://www.merriam-webster.com/dictionary/capitalism)
>
> Capitalism is an economic system in which private individuals or businesses own capital goods. The production of goods and services is based on supply and demand in the general market—known as a market economy—rather than through central planning—known as a planned economy or command economy. -- [Investopedia](https://www.investopedia.com/terms/c/capitalism.asp)

Both definitions provide two elements necessary for "capitalism":
(1) private individual / corporate business ownership of capital goods and
(2) private decisions based on the given market's supply and demand curves (and the factors influencing those curves).

> **Comments:**
> **username_0**: I like this answer (because it starts by saying there is no set definition), but I feel it dances around the main issue a bit: what level of state involvement (or ownership of the means of production) can you have in an economy and still call it capitalism? E.g. there is some contrast between your answer and [this one](https://economics.stackexchange.com/questions/20610/what-metrics-can-be-used-to-distinguish-between-capitalistic-and-socialistic-eco).  
> **username_3**: @username_0 I believe that is a different question from the original one, but it goes back to not having a "set" definition. Like any word/phrase, a definition details the "if and only if" points. "Capitalism" is a broad term with only the 2 parameters of private ownership and private decisions. For more precise information on the level of state involvement, we need to use the sub-definitions of "capitalism" (i.e. definitions for crony capitalism, state capitalism, etc.). However, the above definition seems to allow any state involvement as long as private ownership and decisions are allowed.  

---

### Answer by username_4 on 2019-09-14. Score: 4

The dictionary definitions of capitalism (currently the most upvoted answer) have been critiqued as inadequate, in the sense that they are too broad, by Geoffrey Hodgson in his treatise, *Conceptualising Capitalism* (University of Chicago Press, 2015).

> Definitions proliferate. Most dictionaries stress private
> ownership and markets; many add the profit motive. The entry in The
> New Encyclopaedia Britannica (1998, 2:831) is typical: “Capitalism, also
> called free market economy, or free enterprise economy: economic system
> . . . in which most of the means of production are privately owned
> and production is guided and income distributed largely through the operation
> of markets.”
>
> But, if we consider systems based largely on private ownership, the
> profit motive, and markets, we can find many examples before the medieval
> era. [...] trade has existed for tens of
> thousands of years, markets may have appeared as long as five millennia
> ago in China, and they were evident in several locations in the eastern
> Mediterranean and the Middle East around 600 BC. Private ownership,
> the pecuniary calculus, and the profit motive have similarly played
> a prominent role in leading economic regions for thousands of years.
> Hence, prominent dictionary definitions of capitalism make it a system
> that has lasted for multiple millennia. If we adopt such definitions, then
> we need to find another word to describe the institutional structures that
> were consolidated in the eighteenth century and gave rise to spectacular
> economic growth and ongoing technological innovation.

And he does have his own definition (which I will not try to argue that is mainstream); its premise is that:

> Capitalism [...] requires special forms of state that cannot confiscate property arbitrarily at will, that are effectively restrained by laws, that have internal
> checks and balances, and that are faced with countervailing (democratic
> or other) powers that help protect a relatively autonomous legal system.
> Such states are necessary to legitimate and protect property rights and
> to enforce contracts. They required peculiar circumstances and a long
> time to evolve. Foreshadowed in the Italian city- states, they did not appear
> on a national scale until the seventeenth century, in Britain and the
> Netherlands. [...]
>
> I argue that, while markets are central to capitalism, capitalism is not
> simply a market system: unavoidably it contains different subsystems of
> governance, production, distribution, and exchange. Furthermore, capitalism
> cannot in principle have markets for everything or bring everything
> within the orbit of commodity exchange.
> In particular, under capitalism there can never be a complete set of
> markets for future labor power. For there to be full futures markets for
> labor, all workers must enter into contracts for their expected working
> life. This would be tantamount to voluntary bondage, limiting the freedom
> of workers to quit their employment. Paradoxically, pushing markets
> to their limits would mean the return of slavery for the workforce.

He goes on to semi-formalize a list of tenets that constitute capitalism first according to [his interpretation of] Marx and then similarly for Schumpeter

> M[arx]-capitalism
>
> 1. A legal system supporting widespread individual rights and liberties to own,
>    buy, and sell private property
> 2. Widespread commodity exchange and markets involving money
> 3. Widespread private ownership of the means of production by firms producing
>    goods or services for sale in the pursuit of profit
> 4. Much of production organized separately and apart from the home and
>    family
> 5. Widespread wage labor and employment contracts
>
> Most dictionary and encyclopedia definitions emphasize conditions
> (1), (2), and (3), albeit often without emphasis on the legal system. More
> than Marx, the notion of M-capitalism emphasizes the legal system and
> individual rights. Regarding condition (4), the separation of much production
> from the family and the domestic sphere was emphasized by Weber
> (1968) and is implicit in Marx’s writings. Weber rightly argued that
> this separation was important to subject production to systems of rational
> accounting and pecuniary motivation. Marx emphasized condition
> (5) because it flows from the nature of capitalism as generalized commodity
> production and encapsulates the driving antagonism between
> the employing class and the working class. [...]
>
> A problem [...] is that the addition of
> condition (5), widespread wage labor, to the preceding four does not effectively
> demarcate modern industrial capitalism from the four preceding
> centuries when wage labor was widespread in rural England.
> M-capitalism, as specified above, gives us a better-than-average definition,
> but not one that is sufficiently sharp in terms of historical specificity.
>
> Further problems of historical demarcation arise with the first four
> conditions. As noted in section 4.4 above, the idea that secure property
> rights were first established in England in the seventeenth century is a
> myth. Furthermore, money, markets, and private ownership have existed
> for millennia. The fourth condition is helpful but hardly sufficient as an
> explanation of massive expansion of capitalism around 1800. The five
> conditions are inadequate to demarcate historically the explosion of capitalist
> productivity even if they are necessary for that system.

As for S[chumpeter]-capitalism, he argues that it contains all of the above, except for #5, but that additionally it has

> 6. A developed financial system with banking institutions, the widespread use
>    of credit with property as collateral, and the selling of debt
>
> The addition of condition (6) takes seriously the monetary definition
> of capital and institutions promoting collateralization and the salability
> of debt. Capitalism is thus marked by “the predominance of ‘capital’”
> (Sombart 1930, 196). This definition points to the development of institutions
> of clearer historical specificity. According to this definition, the
> emergence of capitalism in England is marked by developments in financial
> institutions in the eighteenth century.
>
> Note that condition (1) in the definitions of M-capitalism and
> S-capitalism rules out (at least widespread) slavery. Consequently, both
> M-capitalism and S-capitalism involve missing futures markets for labor.
> With S-capitalism, there may be self-employment or worker cooperatives
> but not extensive slave labor. M-capitalism rules out an economy
> with predominant self- employment or worker cooperatives.

As you can probably guess, by synthesis, he argues that the definition of capitalism should include the superset of 1-6 from both M- and S-capitalism (which already have a lot in common).

> But there is a cost to the exclusion of condition (5) from this definition. [...] the advantage of retaining
> the employment contract in the definition of capitalism is that it demarcates
> the system from economies involving self-employed producers or
> worker cooperatives. Furthermore, the introduction of wage labor gave
> important incentives for labor-saving innovations and led to increases in
> productivity. Consequently, the definition of capitalism that is favored
> here— and described simply as capitalism, without any prefix— involves
> all six of the above conditions. [...]
>
> Conditions
> (5) and (6) serve as fuzzy historical bookends, together demarcating
> capitalism from preceding systems and possible successors. [...]
>
> Explicit reference to social class is also absent from the definition offered
> above. In his review of different definitions of capitalism, Michael
> Merrill (1995) argued that capitalism is much more than simply a market
> economy. He was right about that. But he wanted to define capitalism as
> “a market economy ruled by, or in the interests of, capitalists” (322). A
> problem [...] is that the basis of class itself has to
> be defined, and Marx and Engels were obliged to use legal terms such as
> ownership to do so. Being a capitalist or a worker is not a congenital attribute:
> it is the occupation of a social role that is determined in part by
> legal relations. Class-related legal terms appear in all points above, except
> condition (4).
>
> Marxists have abused class-centered definitions of capitalism. They
> see class struggle, where the destiny of one class is to seize control of the system from another. But, notwithstanding the power of capitalists over
> workers, capitalists do not control capitalism: it is more the other way
> round. Such large and complex systems cannot be fully controlled, as if
> from a single chamber of power.

And while he disses that idea that capitalists control capitalism itself as a caricature, he nevertheless argues that it is an integrated economic and political system (and in this he is not that original, as he acknowledges):

> The central role of the state within capitalism means that we must
> address politics as well as economics. [...] Douglass C. North, John J. Wallis,
> and Barry R. Weingast (2009, 269) argued: “The seeming independence
> of the economic and political systems on the surface is apparent, not
> real. In fact, these systems are deeply intertwined.” I also concur with
> Bruce R. Scott (2009, 4) in his claim that capitalism is both “a political
> phenomenon” and “an economic one” and that “specifically it requires
> the visible hands of political actors exercising power through political
> institutions.” Capitalism always involves legal and political institutions:
> pure “anarchocapitalism” is an unrealizable fantasy.

And since the Austrians (Hayek actually) got mentioned in the question, Hodgson has this to say about their approach to defining capitalism:

> The Austrian economists had
> little to say about the sphere of production—conditions (4) and (5)—
> including the employment contract. Although they mentioned money
> many times, they paid insufficient attention to the use of property as collateral
> or to the selling of debt—condition (6). Their theory of money
> downplays the vital constitutive role of the state. At best, they stressed
> three of the six conditions only. The first three conditions are insufficient to identify the institutions of the capitalist system that were responsible
> for the explosive production of wealth in the last three hundred
> years.

While this may not be any sort of consensus statement, it is at least a comparative analysis of various definitions (from fairly prominent sources).


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### Answer by username_5 on 2019-09-11. Score: 1

[CORE](https://www.core-econ.org/) is an open-access economics course put together by a group of experts (including colleagues of mine).

[This page](https://core-econ.org/the-economy/book/text/01.html#17-capitalism-as-an-economic-system) covers their definition of a capitalist system. From there, this figure 1.8 visualises one aspect of it:
[![enter image description here](https://i.sstatic.net/DnEd4.jpg)](https://i.sstatic.net/DnEd4.jpg)

They go on to say:

> The distinctive hallmark of the capitalist economic system is the
> private ownership(1) of capital goods(2) that are organized for use in
> firms. Other economic systems are distinctive because of the
> importance of privately owned land, the presence of slaves, because
> the government owns capital goods, or because of the limited role of
> firms. Capitalist economies differ, too, from earlier economies in the
> magnitude of the capital goods used in production. Massive power looms
> have replaced spinning wheels; a tractor now pulls a plough to do a
> job once done by a farmer using a hoe.
>
> Capitalism is an economic system that combines centralization with
> decentralization. It concentrates power in the hands of owners and
> managers of firms who are then able to secure the cooperation of large
> numbers of employees in the production process. But it limits the
> powers of owners and of other individuals, because they face
> competition to buy and sell in markets.
>
> (1) the right to use and exclude others from the use of something, and
> the right to sell the thing that is owned
>
> (2) The equipment, buildings, and other durable inputs used in
> producing goods and services, including where applicable any patents
> or other intellectual property that is used

> **Comments:**
> **username_6**: This definition is too broad/vague. It could be applied to economies before the era of Adam Smith et al.  
> **username_4**: I'm not convinced most economists would agree that firms are needed for capitalism. The figure seems to conflate some issues... i.e. it seems to define what others call corporate capitalism.  
> **username_4**: See for example https://www.jstor.org/stable/4177297 which contrasts "classical capitalism" with "corporate capitalism".  The latter is "based on a diffused private property regime. The great corporation supersedes the small family company. Its ownership is structured in the form of a joint stock company with a dispersed shareholding, while internal control is implemented through huge and complex hierarchies of command." [continues]  
> **username_4**: "The firm is no longer a thing that belongs to a person or a group of persons endowed with residual control. Rather, it is itself a person, i.e. a social entity with a legal personality, able to enter into contracts and transactions with all the other social actors (Iwai, 1997). The entrepreneurs are managers who act as both agents of the shareholders and functionaries of the company. Their objective, in the former role, is the value of the firm, in the latter, company growth. In principle there is no contradiction between the two goals [...]"  
> **username_4**: Alternatively, corporate capitalism is called "managerial capitalism" https://www.oxfordreference.com/view/10.1093/oi/authority.20110803100129827?rskey=NfaMcF&result=42  
> **username_4**: Other authors like  Hodgson do exthort the corporation as core feature of capitalism as we know it. (So you have my upvote) Also, Hodgson (see my answer for more details) tries to differentiate between capitalism as a post-18th century system and broader definitions that cover [parts of] lots of other systems. So the CORE textbook is probably trying to do this too, although it isn't as explicit.  

---

### Answer by username_7 on 2023-08-30. Score: 0

While "economics" doesn't have a definition, what I find most important is recognizing that there are at least 2 substantially different definitions of capitalism in wide circulation. Clarifying (or simply avoiding the use of the word entirely) is often critically important to having productive discussions.

1. Captialism when spoken by advocates of it generally means "a system of market economics where property rights are secure and the action of private individuals determines what happens in the market."
2. Capitalism when spoken by detractors of it generally means the same as "cronyism". I might define it as "a system where those who control most of the capital are given or take political advantage."

There are similarly two different primary meanings for "socialism":

1. Socialism when spoken by advocates of it generally mean "a system where the welfare of the common person is respected and given fair treatment, often involving government social safety nets of various kinds"
2. Socialism when spoken by detractors of it generally means "a system where the government controls production of goods and services"

One simply can't have a productive conversation across the aisle without understanding both of these definitions and how to avoid confusion around them. My method is usually to talk about command economies vs market economies and make sure to distinguish cronyism as a separate thing.

> **Comments:**
> **username_7**: You seem to not realize that words very often have *multiple* definitions. The answer is not always to consult a dictionary and find the "one true definition", especially when there isn't one.  

---

### Answer by username_6 on 2019-09-11. Score: -4

Capitalism is

1. [considering money capital](https://economics.stackexchange.com/q/11358/4101), i.e., considering money itself productive
2. "*control over economic life in the name of the unrestricted and unlimited acquisitive interests of those who own capital.*" (Heinrich Pesch, S.J., [*Ethics and the National Economy*](https://isidore.co/calibre/#panel=book_details&book_id=5322) p. 159; cf. [these quotes](https://economics.stackexchange.com/a/31833/4101) from it)
3. "state-sponsored usury" ([E. Michael Jones](https://culturewars.com/), *[Barren Metal: A History of Capitalism as the Conflict Between Labor and Usury](https://isidore.co/calibre/#panel=book_details&book_id=7459)*)
4. "means of production […] being concentrated in the hands of a few owners" ([John Médaille](https://distributistreview.com/archive/an-introduction-to-distributism))
5. a "dictatorship" of "those who, since they hold the money and completely control it, control credit also and rule the lending of money" and "regulate the flow, so to speak, of the life-blood whereby the entire economic system lives" (Pius XI, [*Quadragesimo Anno*](https://w2.vatican.va/content/pius-xi/en/encyclicals/documents/hf_p-xi_enc_19310515_quadragesimo-anno.html) §106)
6. Austin Woodbury, S.M., [*True and False Capitalism: A Catholic Analysis*](https://isidore.co/calibre#panel=book_details&book_id=9247), § Forms of Investment: "capitalism is nothing else than the name for the act of investment." He distinguishes 2 types:
   1. natural capitalism (investing in productive goods)
   2. spurious capitalism (investing in order to impede production; e.g., a competitor buying his competition in order to form a monopoly)
7. Julio Meinvielle, [*Concepción católica de la economía*](https://isidore.co/calibre/#panel=book_details&book_id=9839), p. 5:
   > an economic system that seeks the unlimited growth of gain through the application of mechanistic economic laws.
   >
   > ---
   >
   > *un sistema económico que busca el acrecentamiento ilimitado de la ganancia por la aplicación de leyes económicas mecánicas.*

> **Comments:**
> **username_0**: Except for the first one, these all seem like disparaging comments rather than exact definitions.  
> **username_6**: @username_0 These definitions distinguish capitalism from other market economies such as those that existed before Adam Smith's era.  
> **username_6**: @username_0 Also, why is #1 not disparaging?  
> **username_0**: Good point! However, in most (objective) intertemporal models there is good reason to assume that money/wealth/savings may be productive.  

---

