Abstract
Abstract This chapter presents and discusses the most influential argument in favor of a capitalist economy characterized by widespread economic freedom as opposed to central government planning. Capitalist ecnonomies, on this traditional view, are better than planning because they are efficient. Normatively this is important since human welfare is important. Capitalism delivers the goods better than the alternative in terms of both the goods that are produced and the welfare that it generates. This is argument relies on the importance markets and trade to produce price signals disperse private, often implicit knowledge through a public signal. Capitlist markets are, in this sense, spontaneous orders that work best when left alone. The chapter then examines some counterarguments that emphasize the limits of price signaling and other alleged cases of “market failure.”
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