This chapter contrasts the characteristics of three economic systems—capitalism, socialism, and the mixed economy—and lists the implications of each system for the performance evaluation process. Prices and wages are set arbitrarily under socialism and do not reflect voluntary transactions between the buyer and seller. The chapter describes egalitarianism as the most common utopian basis and discusses how it has been incorporated into selection and placement procedures in the past and the probability that it will be incorporated into performance appraisal. In personnel management the former refers to the effectiveness with which an individual performs a specified job whereas the latter refers to the value of the job itself to the organization. The process of performance evaluation is profoundly affected by the political-economic system in which it occurs. The keys to understanding the relationship of capitalism and performance appraisal or performance evaluation are the price system and the profit system.