Capitalism: An economic system in which private individuals and business firms carry on the production and exchange of goods and services through a complex network of prices and markets. Although rooted in antiquity, capitalism is primarily European in its origins; it evolved through a number of stages, reaching its zenith in the 19th century. From Europe, and especially from England, capitalism spread throughout the world, largely unchallenged as the dominant economic and social system until World War I ushered in modern communism (or Marxism) as a vigorous and hostile competing system.
Microsoft® Encarta® Encyclopedia 2001. © 1993-2000 Microsoft Corporation. All rights reserved.

Transcript from Commanding Heights:

Chapter 3: Communism on the Heights [6:16]
Onscreen title: Vienna, 1919

ALBERT ZLABINGER: Ludwig von Mises was the preeminent economist of the Austrian school. The distinguishing hallmark of the Austrian school of economic thought is that markets work and governments don't.

NARRATOR: Von Mises predicted that the new Soviet socialist economy would never work, precisely because the government controlled wages and prices.

DANIEL YERGIN: What von Mises said is that the great flaw of socialism is that it doesn't have a functioning price system to send all the signals to consumers and producers as to what something is worth; that these prices are at the very heart of what makes a functioning economy work. You can think of them as traffic signals. And if you don't have them, what you get is a system that doesn't work, or you get chaos.

ALBERT ZLABINGER: Von Mises argued that free markets do it best -- why fool with anything else?

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