Reflection on Capitalism and Incentives

This week in Personal Finance we discussed capitalism and the different fundamentals of a market economy. The first central fundamental of capitalism is private property which means that everyone is free to have their own property. There are other fundamentals such as specialization so people can focus their efforts on jobs they are best at and consumer sovereignty which allows people to choose what they want to buy. There is also competition to keep prices fair and deals better. Voluntary exchange has two parties enter into a contract where they both work for their mutual benefit. Limited government involvement allows these fundamentals to work freely. The fundamentals of a market economy provide the right conditions for capitalism to thrive. The success of capitalism could not be possible without incentives.
We learned that incentives drive people to work for the success that a free market economy has the potential to produce. An incentive is anything that enables or motivates a particular course of action. Incentives motivate the people in a market economy to work hard for all that they own. People have to work for the profit motive which is all the money people make after all the expenses have been paid. Producers really work for a profit and consumers help them achieve this when they purchase goods and services.
I think that incentives are a highly effective method of producing a productive economy. People work best when they have something to look forward too. This system encourages people to work in their own self-interest, but also causes the economy to grow as well. No progress could be made if people did not have an incentive to improve. This is why capitalism with its fundamental system of incentives is successful. In our class, we can use this knowledge to understand the market economy's different parts better.