An Operational Definition of Capitalism
What is the definition of capitalism? When I review the common definitions offered, I find that they often include assumptions that strike me as unnecessary.
The Cambridge Dictionary offers:
The definition mentions "private ownership". All economic systems that I know about include public goods which are shared such as the air and government-owned goods such as a government building. Further, all goods that are owned are not owned without restrictions. There are often rules about their use, limitations on when they can be used, circumstances where they can be taken away, etc. If it turned out that a majority of goods were highly regulated, does that mean that the economic system is no longer based on private ownership?
It also mentions "the goal of making the greatest possible profits for the owners". This is a strange statement. If a majority of property owners are lazy or looking for win-win opportunities where they are willing to sacrifice some short term profit in exchange for better professional relationships does that mean that the economic system is no longer capitalistic? What would be the proper term for an economic system that has private property but where people do not maximize profit? This definition suggests that it would be some term other than capitalism.
Here is the Wikipedia's definition:
This definition mentions "private ownership of the means of production" and their operation for "profit". If there is private ownership of the distribution of goods but not the means of production, is an economy no longer capitalistic? What if the means of production is from a socialist country, does that then invalidate the capitalism of the importer?
While these types of definitions are very common, I feel that they tell you more opinions about capitalism and less about what capitalism exactly is.
I would offer the following operational definition of capitalism:
I like this definition because it makes this point very clear and it changes the question.
Goods and services will always be available so long as there is demand at the cost of supply. From this perspective, profit motive is not the goal of capitalism but rather the precursor to a good being available at a given price. So, defining capitalism as having the goal of maximizing profit or even having a profit motive is unnecessary and rather obvious.
Using this definition, we can distinguish capitalism from volunteer work or social activism. Assuming that the persons engaged in these activities are not paid in currency or in the potential gain of currency, then the supply and demand is not based on capitalist markets. It is based on a service-motivate, a spiritual-motive, a civic-pride motivate, etc.
The claim here is not that capitalism is the only the reason for the distribution of goods and services. I am claiming that it will always exists for goods and services that are scarce, valuable, and where the profit gained justifies the effort required to sell.
The Cambridge Dictionary offers:
an economic system based on private ownership of property and business, with the goal of making the greatest possible profits for the owners
The definition mentions "private ownership". All economic systems that I know about include public goods which are shared such as the air and government-owned goods such as a government building. Further, all goods that are owned are not owned without restrictions. There are often rules about their use, limitations on when they can be used, circumstances where they can be taken away, etc. If it turned out that a majority of goods were highly regulated, does that mean that the economic system is no longer based on private ownership?
It also mentions "the goal of making the greatest possible profits for the owners". This is a strange statement. If a majority of property owners are lazy or looking for win-win opportunities where they are willing to sacrifice some short term profit in exchange for better professional relationships does that mean that the economic system is no longer capitalistic? What would be the proper term for an economic system that has private property but where people do not maximize profit? This definition suggests that it would be some term other than capitalism.
Here is the Wikipedia's definition:
Capitalism is an economic system based on the private ownership of the means of production and their operation for profit.[1][2][3][4] Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system and competitive markets.
This definition mentions "private ownership of the means of production" and their operation for "profit". If there is private ownership of the distribution of goods but not the means of production, is an economy no longer capitalistic? What if the means of production is from a socialist country, does that then invalidate the capitalism of the importer?
While these types of definitions are very common, I feel that they tell you more opinions about capitalism and less about what capitalism exactly is.
I would offer the following operational definition of capitalism:
Any distribution of goods based on supply and demand that involves the exchange of money or currency.If this definition is accepted, then the following principle becomes clear:
If a currency or money exists, then capitalism is inevitable.In other words, regardless of what the government decides, capitalism still occurs. Whether it is the dark web, the black economy, capitalism occurs even when goods are deemed illegal or when countries deem their economies socialist.
I like this definition because it makes this point very clear and it changes the question.
Goods and services will always be available so long as there is demand at the cost of supply. From this perspective, profit motive is not the goal of capitalism but rather the precursor to a good being available at a given price. So, defining capitalism as having the goal of maximizing profit or even having a profit motive is unnecessary and rather obvious.
Using this definition, we can distinguish capitalism from volunteer work or social activism. Assuming that the persons engaged in these activities are not paid in currency or in the potential gain of currency, then the supply and demand is not based on capitalist markets. It is based on a service-motivate, a spiritual-motive, a civic-pride motivate, etc.
The claim here is not that capitalism is the only the reason for the distribution of goods and services. I am claiming that it will always exists for goods and services that are scarce, valuable, and where the profit gained justifies the effort required to sell.
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