There are different systems through which economies are run. Capitalism and socialism are the two most common types. Both of these are different from each other. There are economies in which both of these systems exist, but one tends to be more than the other.

Economic system based on the private or corporate ownership of the production and distribution of the goods is called Capitalism. Capitalism existed in all civilizations to some extent. In this system the mean of productions are owned and operated by private citizen. Capitalism is formally written for the first time by Adam smith in his book Wealth of Nations in 1776. Capitalist system is free of enterprise. In capitalist system government do not interfere in the economy. It is the law of demand and supply which ensures in capitalist economy that economy is running efficiently. This system has the characteristic of competition. There is a competition in supplying or getting economic services and goods. Sellers and buyers compete among themselves. The buyer always look for the best possible deal in buying goods and the sellers are always in search of the best possible sale which give them more profit. In capitalism the rich become richer and the poor become poorer. The economy remains imbalanced because wealth is concentrated in few hands and is not distributed. It is the system in which people invest their savings, do work and reap the reward. The capitalism can remain fair only until the wealth get inherited.

In contrast to capitalism socialism is the economic system in which government is responsible for economic planning, production and distribution of the goods. It is basically a common ownership. Common ownership means the equal right of participating in the decision of the use of the resources. In this system the central figure owned and operates the production means. The concept of the socialism takes birth in late eighteen. It was the time period of industrial revolution owners were becoming wealthy and workers impoverished. In socialism there is one class because money keeps on circulating. In socialism there is no monopoly because property and wealth is shared equally.