This article presents a typology of social systems that helps to take a fresh look at the choice between capitalism and socialism.The proposed typology rests on a theory of social systems where institutions that systems are comprised of are "subjective" devices that are a product of individual behavior when it turns into routine.In a typical approach capitalism is equated with market as an institution and socialism with state as an institution.Assumed "objective" devices,these institutions determine motivation of individuals in making their choices.Motivation in turn determines how efficient individuals are.When one system,be it socialism,is found efficient and sustainable the other one,meaning capitalism,is seen as inefficient and unsustainable.This makes them opposites that are not substitutable.In contrast,within the subjective theory of institutions,motivation is not determined by institutions but by morality to be understood as a sense of concern or responsibility for others.Aimed at ensuring survival,morality is mainly developed within the setting of family as an institution with all its variety.The core of social values consists of the moral concept of family.Given this,not market and state but family with its values is the main determinant of efficiency.To define capitalism and socialism one thus needs first to establish what role family and morality play within each system.In the adopted here typology,systems fall in two basic categories,sustainable that are based on family and morality and unsustainable where family is marginalized and morality is thwarted.Capitalism and socialism are put in the sustainable category since family and morality is the core of them.In unsustainable category is a system called "commercialism",where monopolies capture market to overrule family and replace morality with carrying for one’s only.Another one is where cliques capture state with the same overall effect.Capitalism and socialism differ,since capitalism shows preference for market and socialism for state.But this is not any market or any state,since given the central role of family and values family stands for they are both "embedded" in morality.Being "embedded" market and state don’t have to differ in terms of efficiency.The choice between capitalism and socialism is thus not a matter of efficiency but of moral preference regarding self-reliance versus dependence.Given this,capitalism and socialism should be treated as workable alternatives.This point is forcefully made by Schumpeter as part of his hardly matched insights into systems of capitalism and socialism.The common practice is for proponents of capitalism to confuse socialism with authoritarianism.Proponents of socialism often misrepresent capitalism as commercialism.This leads to unnecessary polarization of debate on the merits of capitalism and socialism.Using this typology also helps in establishing what ideologies various systems draw their support from.Liberalism is not the ideology of "capitalism’ as properly defined but of "commercialism" and Marxism is not the ideology of "authoritarianism" but of "socialism" as it should be understood.Turning from Western to Asian thought,Confucianism is also an ideology of "socialism",probably in an even more forceful form.Further benefit is that the typology in point allows for better identification of systems operated in different countries.If one accepts the views of the two greatly indebted to Schumpeter American economists Krugman and Stieglitz,the current American system should be viewed not as "capitalist" but "commercialist".China,after all the market reforms of the last two decades continues to be "socialist".Given her deep Confucian roots,China is not likely to ever become "capitalist" as defined here.Trying to maintain the postwar hegemony,America is handicapped by her current system but with her reformed system China is definitely not.That China avoided 2008 world crisis that America triggered seems to prove this point.Western Europe is also in a better situation,with her economies falling in the sustainable category of either "capitalism" or "socialism".That in contrast with America Western Europe managed 2008 crisis relatively well,is might be the evidence this is the case.Contrary to the popular assertion,the challenge to America’s world hegemony could be actually coming not primarily from China but rather mainly from Western Europe.