Capitalism is a system
Capitalism does not arise naturally, but is rather the intentional compilation of institutions that interlock and reinforce each other. Well-functioning capitalist economies rely on governance and norms that ensure market integration and access, property rights for market participants, and vital structures that persist across time.
There are three types of capital
Capitalism privileges the maximal aggregate deployment of all three types of capital: financial, physical, and human. Many traditional definitions privilege the unfettered deployment of tangible assets. However, effective capitalist systems balance and optimize for the freest combined use of capital in all its forms.
Markets are open
Capitalism depends on open market systems in which stable governance and norms provide the opportunity for mutually beneficial exchange. In an open market environment, prices are relatively unconstrained and accurately convey information.
Public and private constraints matter
An accurate understanding of capitalism recognizes that constraints on the deployment of capital can come from the public and private sectors. Powerful governments and firms can curtail the free deployment of capital through impediments like monopolies, price fixing, gatekeeping, and cronyism.