This essay illustrates the point that capitalism is not dead. Capitalism, in fact, has produced successes, including market failures. A capitalist economy is one that allocates resources through the decentralized decisions of many businesses and households interacting in markets for goods and services. Centrally planned economies do not involve the decisions of businesses and households, thus ignoring what many buyers ask for and sellers want to sell. A centrally planned economy does not promote the efficiency of an economy, but tries to address the issue of equity. However, Adam Smith made an important observation which was illustrated in his book: An Inquiry into the Nature and Causes of Wealth of Nations. This observation is that “households and firms interacting in market economies act as if guided by an “invisible hand” that guides the market to allocate resources efficiently.” Prices agreed upon by buyers and sellers lead to a more favorable outcome which is an increase in a society's well-being (Mankiw 83-85). Markets are usually a good way to organize economic activity, however, market failure can occur. if the market does not allocate resources efficiently, thus leading to government intervention. The government enforces rules to help prevent market failure. An important impact that government has in a market economy is to enforce property rights so that an individual can own and control scarce resources. The government provides police and courts to enforce people's rights to goods and services produced or owned by an individual. Market failure can be caused by an externality, which is the impact of a person's or firm's actions on the well-being of a third party, or by market power, which is the ability of a sin… amidst the paper… .....nytimes.com. The New York Times, April 7, 2007. Web. May 16, 2011. Mankiw, Gregorio. Principles of macroeconomics. 5th ed. Mason, OH: Worth Pub, 2007. 55-85. Print.Roback, Jennifer. “The Political Economy of Segregation: The Case of Segregated Streetcars.” The Journal of Economic History 46.4 (1986): 893-917. Cambridge University Press. Network. May 14, 2011. Vedder, Richard K., and Lowell E. Gallaway. "Tax reduction and economic welfare". The United States House of Representatives • House.gov. Joint Economic Committee Study, April 1999. Web. May 12, 2011. Williams, James R. “History and Analysis: Crude Oil Prices.” WTRG Economy -OPEC, Crude Oil, Natural Gas, Analysis, Forecasts and Data. West Texas Research Group. Network. April 12. 2011. .