The Mixed Economy

There are no economies in the world which are entirely „market‟ or planned, all will contain elements of both systems. The degree of mix in any one economy is the result of a complex interaction of cultural, historic and political factors. For example the USA which is a typical example of a largely work-based society, but the government still plans certain areas of the economy such as defence and provides very basic care for those who cannot afford medical insurance.

Features of this system

The mixed economy includes elements of both market and planned economies. The government operates and controls the public sector, which typically consists of a range of public services such as health and education, as well as some local government services. The private sector is largely governed the force of mechanism and “market forces”, although in practice it is also controlled various regulations and laws. Some services may be subsidised, provided at a loss but kept for the benefit of society in general(many national railways, for example, are loss making), other services such as education or the police may be provided free of charge (though they are paid for through the taxation system).

The private sector is regulated, i.e. influenced the price mechanism but also subject to some further government control, such as through pollution, safety and employment regulation.

Advantages of the Mixed Economy

Necessary services are provided in a true market economy, services which were not able to make profit would not be provided. Incentive: Since there is a private sector where individuals can make a lot of money, incentives still exist in the mixed economy. Competition: Prices of goods and services in the private sector are kept down through competition taking place.

Disadvantages of Mixed Economy

Large monopolies can still exist in the private sector, and so competition does not really take place There is likely to be a lot of bureaucracy and “red tape” due to existence of a public sector.

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