Which feature of capitalism says that persons may own and control their possessions?

What Is Free Enterprise?

Free enterprise, or the free market, refers to an economy where the market determines prices, products, and services rather than the government. Businesses and services are free of government control. Alternatively, free enterprise could refer to an ideological or legal system whereby commercial activities are primarily regulated through private measures.

Free Enterprise

Free Enterprise as Law and Economics

In principle and in practice, free markets are defined by private property rights, voluntary contracts, and competitive bidding for goods and services in the marketplace. This framework is in contrast to public ownership of property, coercive activity, and fixed or controlled distribution of goods and services.

In Western countries, free enterprise is associated with laissez-faire capitalism and philosophical libertarianism. However, free enterprise is distinct from capitalism. Capitalism refers to a method by which scarce resources are produced and distributed. Free enterprise refers to a set of legal rules regarding commercial interaction.

Another definition of free enterprise is in terms of economics and was offered by the Nobel-winning economist Friedrich Hayek. Hayek described such systems as "spontaneous order." Hayek's point was that free enterprise is not unplanned or unregulated; rather, planning and regulation arise from the coordination of decentralized knowledge among innumerable specialists, not bureaucrats.

Key Takeaways

• Free enterprise refers to business activities that are not regulated by the government but are defined by a set of legal rules such as property rights, contracts, and competitive bidding.
• The argument for free enterprise is based on the belief that government interference in business and the economy hampers growth.
• A free enterprise legal system tends to result in capitalism.

The Origins of Free Enterprise

The first written intellectual reference to free enterprise systems may have emerged in China in the fourth or fifth century B.C., when Laozi, or Lao-tzu, argued that governments hampered growth and happiness by interfering with individuals.

Legal codes resembling free enterprise systems were not common until much later. The original home of contemporary free markets was England between the 16th and 18th centuries. This growth coincided with, and probably contributed to the first industrial revolution and birth of modern capitalism. At one time, the English legal code was completely free of international trade barriers, tariffs, barriers to entry in most industries, and limitations on private business contracts.

The United States also used a largely free-market legal approach during the 18th and 19th centuries. In modern times, however, both the United States and the United Kingdom are better classified as mixed economies. Countries such as Singapore, Hong Kong, and Switzerland are more reflective of free enterprise.

Real-World Example

In the absence of central planning, a free enterprise legal system tends to produce capitalism although it is possible that voluntary socialism or even agrarianism could result. In capitalist economic systems, such as that of the United States, consumers and producers individually determine which goods and services to produce and which to purchase. Contracts are voluntarily entered into and may even be enforced privately; for example, by civil courts. Competitive bidding determines market prices.

The U.S. economic system of free enterprise has five main principles: the freedom for individuals to choose businesses, the right to private property, profits as an incentive, competition, and consumer sovereignty.

Abstract

The paper criticizes the corporation from a liberal-capitalist point of view, arguing that incorporation violates the rights and responsibilities of private ownership. Aspects of current capitalist practice which popularly invite criticism from anti-capitalist commentators (e.g. undue power concentration, speculative instability and excessive growth/profit orientation) are traced back to the corporate form rather than to genuinely capitalist institutions such as private property and free exchange. Some disadvantages connected to the proposed repeal of incorporation for private enterprise are discussed.

Journal Information

For over sixty-five years, the Review of Social Economy has published high-quality peer-reviewed work on the many relationships between social values and economics.   The field of social economics discusses how the economy and social justice relate, and what this implies for economic theory and policy. Papers published range from conceptual work on aligning economic institutions and policies with given ethical principles, to theoretical representations of individual behaviour that allow for both self-interested and 'pro-social' motives, and to original empirical work on persistent social issues such as poverty, inequality, and discrimination.   In promoting discourse on social-economic themes, and unifying and invigorating scholarship around them, the journal is centrally concerned with these core research areas. The Review is a journal specialized in and a premier outlet for scholarly research at the intersection of social values and economics, and encourages researchers engaged in high-quality work in these areas. Implications for social programs and policies may be discussed in regular articles or in a Speakers' Corner contribution.   The Review provides a platform for established social-economics research, but also for research from other branches of economics and the social sciences, when the goal of developing better understandings of the role of social values in economic life is pursued.  

Publisher Information

Building on two centuries' experience, Taylor & Francis has grown rapidlyover the last two decades to become a leading international academic publisher.The Group publishes over 800 journals and over 1,800 new books each year, coveringa wide variety of subject areas and incorporating the journal imprints of Routledge,Carfax, Spon Press, Psychology Press, Martin Dunitz, and Taylor & Francis.Taylor & Francis is fully committed to the publication and dissemination of scholarly information of the highest quality, and today this remains the primary goal.

Rights & Usage

This item is part of a JSTOR Collection.
For terms and use, please refer to our Terms and Conditions
Review of Social Economy © 1997 Taylor & Francis, Ltd.
Request Permissions

What is a major feature of capitalism that allows people to own and control their possession as they wish?

What are the 4 Features of the free enterprise system?

Which of the following is a feature of capitalism or free enterprise?

What are the 5 features of the free market system?