Functionalism and conflict theory are two different accounts of how societies form and are structured, based on different basic assumptions about human behavior.
Functionalism says that human beings are fundamentally cooperative, and will work together to build institutions and achieve mutual goals. The whole society is often conceptualized as like a living organism, with individual people playing a role similar to cells in that organism.
Conflict theory says that human beings are fundamentally competitive, and societies consist of individuals and groups in a constant state of conflict over goals and resources. Society is conceived more individualistically, though often the unit of analysis is some sort of group of people (such as "the working class" or "women") rather than individuals.
Both theories contain valid insights, and both have flaws. Human beings are both cooperative and competitive, and while social structures do serve many useful mutual goals, it is also quite common for different people and groups of people to come into conflict. In general, good sociologists apply insights from both theories rather than maintaining a dogmatic view of one or the other.
One of the most important differences between the two theories is what they say about the economic system and distribution of wealth; taken in their most extreme forms, functionalism would say that the economy is a well-oiled machine that functions optimally and the inequality it creates is necessary for efficiency, while conflict theory would say that the economy is a constant state of class warfare in which different groups of people try to grab a larger piece of the pie for themselves. An extreme functionalist would probably oppose redistribution of wealth as undermining the efficiency of the system, while an extreme conflict theorist would likely demand a great deal of redistribution of wealth as a means of making the conflict more fair.
Another important difference between them is how they view social change. Functionalism actually has a hard time making sense of social change, because if institutions are serving their function, why change them? Functionalists could reply by saying that as the world changes, the institutions needed can also be changed, and societies will make the necessary changes. Or, they might say that change, or at least rapid change, is bad, and should be avoided. Conflict theorists on the other hand have a very clear explanation for social change: Everyone is fighting, and sometimes one side wins and the other side loses. Such victories can be temporary or permanent, partial or total. Societies change as different groups take the upper hand in the fight and impose their own goals on the rest of society. Many conflict theorists believe that rapid social change is necessary, because one particular group (namely, rich, White, straight men) has been winning far too much and other groups should be given their fair share.
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