Economic Systems - Mixed Economy

“Mixed economy is an economic system which is combination
of capitalistic economic freedom and principles of socialistic
economic control.”

 Mixed economy aroused when the two systems suffered failure
and need of third system was felt.
These failures are elaborated separately as:
 Failure of capitalism
 Failure of socialism

During nineteenth century,
all countries had free market
economies and the
government intervention
was quite small.
But, with the passage of time, the evils of capitalism such
as unemployment, inequalities in distribution of income
and wealth and business cycle became quite clear

In the beginning of 20th century,
some countries adopted socialism.
But
soon the drawbacks surfaced up.
The rate of economic growth
slowed down and people
started resenting the loss of
their personal freedom.
Socialist economies failed to
match the rapid progress in
technology by capitalistic
countries.

The term "mixed economy" arose in the
context of political debate in the United
Kingdom in the postwar period
 Mixed economy is an economic
system in which both the state and
private sector direct the economy,
reflecting characteristics of both
market economies and planned
economies.

 Supporters of the mixed economy :
 R.H.Tawney
 Anthony Crosland
 Andrew Shonfield
 Harold Macmillan.
 Critics of British Mixed Economy:
 Ludwig von Mises
 Friedrich von Hayek

The making of mixed economy is divided into three different
sections stated as follows:
 Private Sector
 Public Sector
 Autonomous Bodies/Semi-Public Sector

 In economics the private sector is that part of the economy,
sometimes referred to as the citizen sector, which is run by private
individuals or groups, usually as a means of enterprise for profit,
and is not controlled by the state.

 The part of the economy concerned with providing basic
government services to the public is called public sector.
 The composition of the public sector varies by country, but in
most countries the public sector includes such services as the
police, military, public roads, public primary education and
healthcare for the poor.

 Autonomous bodies are those in which public and private
sector work together by merging their resources either to
increase the efficiency or to supplement the deficiency of
resources.
 Still it does not mean that all autonomous bodies are
efficient in their work. There is always possibility of lack of
performance or inefficiency from public sector.

 The demerits of two economic systems acted as the
initiative for the need of third economic system.

 Exploitation
 Inequality of wealth distribution
 Inappropriate use of productive
resources
 Emerging of monopolies
 Unemployment

 Inefficiency
 Consumers suffer
 Economic inequality
 Non existence of political and
economic freedom
 Non-existence of competition

 Co-existence of public and private sector.
 Middle of the road Policy.
 Freedom and control.
 Economic planning.
 Monopolies are regulated.

 Efficient
 Freedom of decision
making of Consumer
 Planned development
 Increase in National
Production

 Corruption
 Fear of nationalization
 Bureaucracy and red tapism
 Conflict between public and
private sector

Almost all the countries have mixed economy system.
America is supposed to be the Capitalistic economy but role
of government is also seen there. China is considered to be
the Socialistic country but private sector also exists there.
Pakistan
India
Scotland
Australia
Japan
Germany
UK

A mixed economy is a mix between socialism and
capitalism.
In this system the freedom in the economic activities are
influenced by the Government's regulation and licensing
policies.

Economic Systems - Mixed Economy

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