Examples of Mixed Economies

 Iceland (57%)
 Sweden (52%)
 France (52.8%)
 United Kingdom 47.3%
 United States 38.9
 Russia 34.1
 China – 20% of GDP
 Hong Kong 18.6%
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Mixed Economy
 A mixed economy means that part of the economy is left to the free market, and part of
it is run by the government.
 In reality most economies are mixed, with varying degrees of state intervention.
 Mixed economies start from the basis of allowing private enterprise to run most
business. Then the governments intervene in certain areas of the economy, such as
regulation, and spending money on public services.
Examples of Mixed Economies
Share of Government Spending as a % of GDP

 Iceland (57%)
 Sweden (52%)
 France (52.8%)
 United Kingdom 47.3%
 United States 38.9
 Russia 34.1
 China – 20% of GDP
 Hong Kong 18.6%
 more at list of government spending as a % of GDP
Advantages of Mixed Economies
 Most business and industry can be left to private firms. Private firms tend to be more
efficient than government controlled firms because they have a profit incentive to cut
costs and be innovative.
 Mixed economies can reduce the amount of government regulation and government
control prevalent in a command economy.
 Mixed economies can enable some government regulation in areas where there is
market failure. This can include:
o Regulation on the abuse of monopoly power, e.g. prevent mergers, prevent excessively
high prices.
o Taxation and regulation of goods with negative externalities, e.g. pollution,
o Subsidy or state support for goods and services which tend to be under consumed in a
free market. This can include public goods, like police and national defence, and merit
goods like education and health care.
 A mixed economy can create greater equality and provide a ‘safety net’ to prevent
people living in absolute poverty. At the same time, a mixed economy can enable
people to enjoy the financial rewards of hard work and entrepreneurship.
 Government can pursue policies to provide macro-economic stability, e.g. expansionary
fiscal policy in times of a recession.
Disadvantages Mixed Economies
 Can be difficult to know how much governments should intervene, e.g. discretionary
fiscal policy may create alternative problems such as government borrowing.
 Mixed economies are criticised by Socialists for allowing too much market forces,
leading to inequality and an inefficient allocation of resources.
 Mixed economies are criticised by free market economists for allowing too much
government intervention. Libertarians argue that governments make very poor
managers of the economy, invariably being influenced by political and short-term
factors.

A mixed economy is an economic system in which both the private

sector and state direct the economy, reflecting characteristics of both market
economies and planned economies. Most mixed economies can be described
as market economies with strong regulatory oversight and governmental provision
of public goods. Some mixed economies also feature a variety of state-run enterprises.
In general the mixed economy is characterised by the private ownership of the means of
production, the dominance of markets for economic coordination, with profit-seeking
enterprise and theaccumulation of capital remaining the fundamental driving force
behind economic activity. But unlike a free-market economy, the government would
wield indirect macroeconomic influence over the economy through fiscal and monetary
policies designed to counteract economic downturns and capitalism's tendency toward
financial crises and unemployment, along with playing a role in interventions that
promote social welfare. Subsequently, some mixed economies have expanded in scope
to include a role for indicative economic planning and/or large public enterprise sectors.
There is not one single definition for a mixed economy, with it defined variously as a
mixture of free markets with state interventionism, or as a mixture of public and private
enterprise, or as a mixture between markets and economic planning. The relative
strength or weakness of each component in the national economy can vary greatly
between countries. Economies ranging from the United States to Cuba have been
termed mixed economies. The term is also used to describe the economies of countries
which are referred to as welfare states, such as the Nordic countries. Governments in
mixed economies often provide environmental protection, maintenance of employment
standards, a standardized welfare system, and maintenance of competition.
 As an economic ideal, mixed economies are supported by people of various political
persuasions, typically centre-left and centre-right, such as social democrats or Christian
democrats. Supporters view mixed economies as a compromise between state
socialism and free-market capitalism that is superior in et effect to either of those

Advantages

 State provides the essential services

 Private sector encouraged for profits
 Competition keeps prices low
 Consumer choice
 Inefficient business behavior controlled

Disadvantages

 Heavy taxes reduce incentives to work hard or make profits

 Less efficient than private sector
 Excessive control over business activity can add costs and discourage enterprise

Advantages
 Producers and consumer have sovereignty to choose what to produce and what to
consume but production and consumption of harmful goods and services may be
stopped by the government.
 Social cost of business activities may be reduced by carrying out cost-benefit
analysis by the government.
 As compared to Market economy, a mixed economy may have less income
inequality due to the role played by the government.
 Monopolies may be existing but under close supervision of the government.

Disadvantages
 It consists of the disadvantages of private sector and government
 Unnecessary government interference
 Government monopolies’
 Private sector monopoly
 Wasteful resources