ABSTRACT
This chapter explains the evolution of the present US economic system, called capitalism. It discusses how capitalism evolved from earlier economic systems; the clash of two viewpoints in macroeconomics, including analysis and political policies; and how the economic institutions of capitalism allow for the possibility of rapid growth as well as the possibility of large-scale involuntary unemployment. Capitalism is defined as an economic system in which private individuals own all of the assets of a business, while another group of people are hired to do all of the labor. Feudalism was the main economic system of England from about 500 to 1500. Progressive economists are those economists who reject the Classical, conservative view that the private economy corrects every recession through an automatic self-adjusting mechanism. The Progressive conclusion is that Classical economics is wrong in saying that the capitalist economic system does not generate aggregate unemployment.
