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What are the merits of Capitalist Economy, Socialist Economy and Mixed Economy ?
Merits of Socialism

Socialism has greater economic efficiency than in capitalism. The means of production are controlled and regulated by the central planning authority towards chosen ends. Economic efficiency is attained by utilising resources in producing socially useful goods and services which satisfy the basic wants of the people. It gives greater welfare due to less inequality of income. Monopolistic practices are absent in this type of economy. The business fluctuations are also not present and hence there is no problem of unemployment or depression.

Merits of Mixed Economy

Mixed economy incorporates best allocation of resources since it features both capitalism and socialism. The price mechanism, the profit motive and the liberty of production and consumption lead to the efficient allocation of resources. It maintains a good balance between public and private sector. Both the sectors have competition in the interest of public welfare. More than any sector the mixed economy contains all features of the welfare of a state.


Merits of Capitalism:

1. Capitalism is self-regulatory. It is regulated by market mechanism leading to several benefits for the economy.

(i) Though the market structure has its own cost in terms of some resources used up in advertising etc., these costs are far smaller than those are, which have to be incurred where the government has to regulate it through some form of central planning. In the latter case, the authorities have to incur expenditure in collecting and processing information, in formulating policies, in issuing directions and in monitoring their implementation.

(ii) The decision-taking process of the government is always more time consuming than is the case with private enterprise. This also causes an additional waste of resources.

2. It is claimed that the process of economic growth is faster under capitalism. This is because the investors try to invest in only those projects, which are economically viable as dictated by the market forces.

3. The capitalist system decides 'what to produce' and' how to produce' in consonance with the forces of demand and supply. Every producer tries to maximize his profit by employing resources in such a manner that the cost of production is reduced to the minimum possible. It, therefore, means that resources are used to produce those goods and services in which they are most productive. This results in an optimum allocation of productive resources of the economy.

4. It is generally believed that long-term projects are more productive. The financial system of the capitalist economy helps the entrepreneurs in selecting long-term projects by providing sufficient credit facilities.

5. Every economic unit tries to adopt a set of activities, which are in its best interest. Advocates of capitalism claim that on account of this reason, there is an harmony of decisions in the economy as a whole, They admit that in reality, capitalism is not able to remove the problems of unemployment or cyclical fluctuations in national income etc. But they say that this is because, in practice, capitalism is not allowed to work in a smooth and perfect manner. It faces several hurdles in the form of unfair competition, monopoly elements, and activities of trade unions etc.

6. Capitalist system provides an incentive for efficient decisions and their implementation in the form of economic gains to the decision makers. This ensures a high degree of operative efficiency in the system.

7. The net result is that a capitalist economy has a tendency to register a high growth rate both in national income and per capita income. It also produces a large and growing variety of products, and has an inherent tendency to develop technology.


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