What economic system is based on private ownership and free markets?

The economic system characterized by private ownership and free markets is capitalism. In a capitalist system, individuals and businesses own the means of production and are motivated by profit. This system supports competition, where the prices of goods and services are determined by supply and demand in an open market, rather than being regulated or set by a central authority. This not only encourages innovation and efficiency but also allows consumers to have the freedom to choose from a variety of goods and services.

In contrast, socialism emphasizes collective or government ownership of resources and often involves central planning, which can limit the level of competition seen in capitalist systems. Feudalism historically structured society around rigid hierarchical systems with land ownership tied to social class and obligations rather than market-based exchanges. Mercantilism, a trade-oriented economic theory of the early modern period, focused primarily on the accumulation of wealth through trade and maintaining a favorable balance of trade but did not prioritize free market principles in the same way capitalism does. Thus, capitalism is distinct in its foundational principles of private property and market-driven economics.