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'''Capitalism''', also called '''free market economy''' is an economic system where the investment of capital, and production, distribution, income, and prices are determined not by government (as in a [[planned economy]]) but through the operation of a market where all decisions regarding transfer of money, goods (including capital goods), and services are voluntary rather than regulated and mandated by government.

'''Capitalism''', also called '''free market economy''' is an economic system where the investment of capital, and production, distribution, income, and prices are determined not by government (as in a [[planned economy]]) but through the operation of a market where all decisions regarding transfer of money, goods (including capital goods), and services are voluntary rather than regulated and mandated by government.

{{Cquote|Whatever a person saves from his [[revenue]] he adds to his [[capital]], and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN.html Book II, Chapter 3, Paragraph 15,] ''Of the Accumulation of Capital, or of Productive and Unproductive Labour'', First Edition 1776.</ref>}}

{{Cquote|Whatever a person saves from his [[revenue]] he adds to his [[capital]], and either employs it himself in maintaining an additional number of productive hands, or enables some other person to do so, by lending it to him for an interest, that is, for a share of the profits. As the capital of an individual can be increased only by what he saves from his annual revenue or his annual gains, so the capital of a society, which is the same with that of all the individuals who compose it, can be increased only in the same manner. <ref>Adam Smith, ''An Inquiry into the Nature and Causes of the Wealth of Nations'', [http://www.econlib.org/library/Smith/smWN.html Book II, Chapter 3, Paragraph 15,] ''Of the Accumulation of Capital, or of Productive and Unproductive Labour'', First Edition 1776.</ref>}}

Smith goes on to describe how the productive powers of labor employed by the owner of a capital allow laborers to reproduce with a profit the value of their maintainance, over and above their own consumption, which then allows for an additional set of hands to be employed. <ref>Smith, 'Wealth of Nations'', Book II, Chapter 3, Paragraph 22.</ref> Sadly, however, most critics agree that since the advances of [[neo-liberalism]], profits rather go to the higher class of society than to the creation of jobs.

Smith goes on to describe how the productive powers of labor employed by the owner of a capital allow laborers to reproduce with a profit the value of their maintainance, over and above their own consumption, which then allows for an additional set of hands to be employed. <ref>Smith, 'Wealth of Nations'', Book II, Chapter 3, Paragraph 22.</ref>

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