Examkin

Question

Difficulty: Very hardCapitalism and Socialism

Complete the following statement on classical political economy by supplying the fundamental ideological principles of free-market capitalism.

Answer:In capitalist theory, the doctrine that advocates strict non-interference by the government in economic affairs is known as 【laissez-faire】, while the automatic market system that regulates resource allocation through supply and demand is termed the 【price mechanism】.

Answer

The doctrine of minimal government interference in free-market capitalism is laissez-faire, and the automatic regulatory force of resource allocation is the price mechanism.
Laissez-faire represents the philosophical backbone of classical capitalism, establishing that individual economic liberty and private ownership function best without state interference. The price mechanism operates as the organic coordinator of resource distribution, adjusting prices continuously based on supply and demand dynamics.

Step-by-Step Solution

1
Identify the classical capitalist principle regarding state non-intervention.
The economic policy of minimal state regulation and unrestricted private enterprise is defined as 'laissez-faire'.
Pioneered by classical economists such as Adam Smith, laissez-faire asserts that economic efficiency is maximized when the state refrains from directive market management.
2
Determine the decentralized system governing production and consumption decisions in a capitalist framework.
The self-regulating system driven by consumer demand, profit motives, and price equilibrium is the 'price mechanism'.
Under capitalism, market prices signal scarcity and preferences, directing capital and labor without central state planning.

Key Concept

Core principles of free-market capitalism: government non-intervention (laissez-faire) and market self-regulation (price mechanism).
Rate this question

Topics

Capitalism and Socialism

More questions from this topic