Considering demand is a function of purchasing power, how does capitalism allocate resources efficiently?

[KM]

Those who have no purchasing power effectively have no "demand". Thus land, labour & capital are allocated to produce for those with the most purchasing power, not for what society as a whole needs.
A poor person demands food, but capitalism will never consider utilizing more land & labour to produce for these basic needs because there is no profit to be made.
It will instead produce Ferraris and yahcts for the very wealthy.
If we consider a system to be efficient if it ensures social benefit is maximized, capitalism is not efficient. Resources are allocated "efficiently" only according to capitalism's definition of efficiency, not social efficiency.
Not everyone has equal opportunities to acquire sufficient purchasing power

[bobemac]

You are wrong and your spelling is atrocious...

[Lenny]

People with money are buying stuff.
In order to get money you have to serve society by offering customers something they are willing to buy at the price they can afford.

When last bum gets money stolen from people who earned them, it is not an efficiency.

[bdwolfhound]

Capitalism creates the resources which are GIVEN to those lacking purchasing power, even when they contribute nothing to "social benefit".

[Maxwell]

"Demand is a function of purchasing power"

This sound a lot like an endorsement for supply side economics.

I'd never have guessed you were a Reaganite.


"capitalism will never consider utilizing more land & labour to produce for these basic needs because there is no profit to be made"

Funny that so many major corporation are in the basic needs industry....like farms, dairies, factories that make bread, etc etc etc

[Utopian Lobotomy]

It is autonomous, with the people truly wielding the power of the market place on every level.

[LiberalsRNutz]

Do you actually believe that nonsense? Who has no purchasing power? There are people with little money who have very little purchasing power and have to realize that they need to prioritize their purchases. If you and your kids are hungry buy food and not a big screen TV with cable and internet. No one is owed a living. It's your job to go out and earn one and not take on responsibilities you cant afford.

[melodicwrenchadvice678]

Markets are a way of allocating resources. Markets allocate resources according to purchasing power. Capitalism is a way of organizing production and deciding who keeps the profits of work. But I guess people usually combine all this and call it market capitalism, or just capitalism, so that's fair enough.

So, in market capitalism human beings have no intrinsic value. Their only purpose is to increase profits for the 1%, whether it be in their role as workers, or as consumers. Once a person is no longer turning a profit for the capitalist, the person is discarded like a piece of garbage.

[Professor Freedom]

First of all, efficiency is a lot more complex to define and evaluate than you make it appear. Secondly, capitalism is too vague a term for the purposes you sought to achieve -- i.e., evaluating the enfficiency of a system. No economist would ever say that capitalism is efficient. He might qualify certain market structures, institutions or organization of efficient, but he'll never use a very general term to do it.

Economic efficiency typically involves accessing how individual interests are coordinated to achieve the goals set out by a group. Since people act so as to attain their objectives, the whole idea is to make sure these objectives can collectively lead to a socially desirable outcome. That desirable outcome is termed as a matter of costs and benefits. If the benefits exceed the costs, people would be better off to go for more; if the costs exceed the benefits, people would be better off to go for less. The objective is thus simple, though very hard to achieve: find a way to coordinate people so they get to a point where the costs and benefits of the last unit are exactly equal.

Are markets efficient? The answer is that it depends on the structure of the market.

The facts that you brought up do serve to make a point, though. It is indeed somewhat extraordinary that we consider so nice a system which leaves some to starve while others can order a third plate that they'll likely throw to the garbage. And, if someone has no problem with this, they're simply downright cruel.