Mixed Economy Simplified

What is a mixed economy? It is difficult to nail down a single definition for a mixed economy. However, all definitions involve a mixture of economic freedom (the freedom to produce, trade, and consume any goods or services attained without fraud, theft, or even use of force) and government regulation. It deals with public and private control while displaying characteristics of capitalism and socialism. Let’s look at a few examples to see how elements of economic freedom and regulation can work together:

Example Freedom: To possess the means of production. This gives the people the right to own and operate a small corner grocery store, a large farm, or factory.

Example Government Intervention: Transportation. All levels of government, from local to federal, levee taxes on the public to fund the construction and maintenance of roads, interstates, bridges, and tunnels.

 

 

 

How can these the private and public realms operate together? Using the transportation example, the government will typically hire a private company to build roads and bridges, which are then utilized by the private and public sectors.

 

 

Most of the world’s developed nations use mixed economies, such as:

  • United States of America
  • United Kingdom
  • Australia
  • Japan
  • Germany
  • Canada
  • Italy

Many developing countries use mixed economies, such as:

  • South Africa
  • Slovenia
  • Mexico

The mixed economy works because the two primary players, the private sector and public sector, benefit each other. The private sector’s goal is to make profit. For every dollar in revenue for the private sector, there is a tax that goes directly to some level of government. The public sector can then afford to continue providing its services to the people, which include but is not limited to, the businesses. Citizens also pay taxes through either goods and services from the private sector or public sector.

What are the advantages of a mixed economy? The first advantage of a mixed economy is that is allows for competition among producers and manufacturers with enough government regulations in place to protect the society. Another advantage of a mixed economy is right of people and businesses to produce, sell, and decide on their own prices.

What are the disadvantages of a mixed economy? The wrong regulation on economic processes can be a catastrophe to certain features of production.  Another disadvantage is that merchants and business must locate markets for their goods and services. They also have no control over the taxes they are required to pay. Taxes can also be an advantage, because they provide revenue for the government to support its citizens and infrastructure.

Here are a few more examples of a mixed economy in action. Economic freedoms consist of the right to start your own business, hire employees, fire employees, and sell goods and services for a profit. The government not only regulates these activities so that other businesses and civilians are ensured consumer safety, but also to try and keep everyone on a level playing ground, such as equal employment regulations. The government does not just regulate these businesses, but also taxes them in order to provide a plethora of goods and services proven nonprofitable by the private sector, such as libraries, education, hospitals, and sanitation.

 

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