Capitalism is an economic system in which wealth, and the means of producing wealth, are privately owned. Through capitalism, the land, labor, and capital are owned, operated, and traded for the purpose of generating profits, without force or fraud, by private individuals either singly or jointly,Wood 2002, p. 2 and investments, distribution, income, production, pricing and supply of goods, commodities and services are determined by voluntary private decision in a market economy.Bacher (2007) p. 2; De George (1986) pp.104, 111; Lash (2000) p.36 A distinguishing feature of capitalism is that each person owns his or her own labor and therefore is allowed to sell the use of it to employers.Wood 2002, p. 2 In a "capitalist state", private rights and property relations are protected by the rule of law of a limited regulatory framework. In the modern capitalist state, legislative action is confined to defining and enforcing the basic rules of the market, though the state may provide some public goods and infrastructure.Eric Aaron, What's Right? (Dural, Australia: Rosenberg Publishing, 2003), 75.

Some consider laissez-faire to be "pure capitalism."McConnell, Campbell R. and Brue, Stanley L., Microeconomics: Principles, Problems, and Policies. McGraw-Hill, 1992. p 38 Laissez-faire (French, "leave to do (by itself)"), signifies minimizing or eliminating state interference in economic affairs and the competitive process, allowing the free play of "supply and demand." Laissez-faire capitalism has never existed in practice. Because all large economies today have a mixture of private and public ownership and control, some feel that the term "mixed economies" more precisely describes most contemporary economies. In the "capitalist mixed economy", the state intervenes in market activity and provides many services.

During the last century, capitalism has often been contrasted with centrally planned economies. The central axiom of capitalism is that the best allocation of resources is achieved through consumers having free choice, and producers responding accordingly to meet aggregate and individual consumer demand. This contrasts with planned economies in which the state directs what shall be produced. A consequence is the belief that privatization of previously state-provided services will tend to achieve a more efficient delivery thereof. Further implications are usually in favor of free trade, and abolition of subsidies. Although individuals and groups must act rationally in any society for their own good, the consequences of both rational and irrational actions are said to be more readily apparent in a capitalist society.