Mixed economy

From Wikipedia, the free encyclopedia
  (Redirected from Mixed Economy)
Jump to: navigation, search

A mixed economy is an economic system that is variously defined as containing a mixture of markets and economic planning, in which both the private sector and state direct the economy; or as a mixture of public ownership and private ownership; or as a mixture of free markets with economic interventionism.[1] 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 the accumulation 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.[2] Subsequently, some mixed economies have expanded in scope to include a role for indicative economic planning and/or large public enterprise sectors.

Economies ranging from the United States[3][4] to Cuba[5] 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.[6][7] 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[8] or Christian democrats. Supporters view mixed economies as a compromise between state socialism and free-market capitalism that is superior in net effect to either of those. Around the world, the most prosperous countries with the highest average standard of living tend to have mixed economic systems with democratically elected governments.


There is not one single definition for a mixed economy;[9] there are generally two major definitions, one being political and the other apolitical. The political definition of mixed economy refers to the degree of state interventionism in a capitalist market economy, portraying the state as encroaching onto the market under the assumption that the market is the "natural" mechanism for allocating resources. The political definition precludes an extension to non-capitalist systems and is concerned with public policy and state influence in a capitalist market system,[10] whereas the apolitical definition relates to patterns of ownership and management of economic enterprises in a society. The apolitical definition of mixed economy refers to a mix of public and private ownership of enterprises in the economy and is unconcerned with political forms and public policy.[11]


The term mixed economy arose in the context of political debate in the United Kingdom in the postwar period, although the set of policies later associated with the term had been advocated from at least the 1930s.[12] Supporters of the mixed economy, including R. H. Tawney,[13] Anthony Crosland,[14] and Andrew Shonfield were mostly associated with the British Labour Party, although similar views were expressed by Conservatives including Harold Macmillan. Critics of the mixed economy, including Ludwig von Mises and Friedrich von Hayek, argued that there can be no lasting middle ground between economic planning and a market economy, and any move in the direction of socialist planning is an unintentional move toward what Hilaire Bloc called "the servile state".[15]


The term "mixed economy" is used to describe economic systems which stray from the ideals of either the market, or various planned economies, and "mix" with elements of each other. As most political-economic ideologies are defined in an idealized sense, what is described rarely—if ever—exists in practice. Most would not consider it unreasonable to label an economy that, while not being a perfect representation, very closely resembles an ideal by applying the rubric that denominates that ideal. When a system in question, however, diverges to a significant extent from an idealized economic model or ideology, the task of identifying it can become problematic. Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a perfectly even mix, mixed economies are usually noted as being skewed towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees.[16]

Relation to forms of government and other ideas[edit]



Historic examples[edit]

The American School (also known as the National System)[18] is the economic philosophy that dominated United States national policies from the time of the American Civil War until the mid-twentieth century.[19] It consisted of three core policy initiatives: protecting industry through high tariffs (1861–1932) (changing to subsidies and reciprocity from 1932–1970s), government investment in infrastructure through internal improvements, and a national bank to promote the growth of productive enterprises. During this period the United States grew into the largest economy in the world, surpassing the UK (though not the British Empire) by 1880.[20][21][22]



Mixed socialist economies[edit]


The social democratic theorist Eduard Bernstein advocated a form of mixed economy, believing that a mixed system of public, cooperative and private enterprise would be necessary for a long period of time before capitalism would evolve of its own accord into socialism.[25]



In his magnum opus Human Action, Ludwig von Mises argued that there can be no mixture of capitalism and socialism - either market logic or economic planning must dominate an economy.[26] Mises elaborated on this point by contending that, even if a capitalist market economy contained numerous state-run or nationalized enterprises, this would not make the economy "mixed" because the existence of such organizations does not alter the fundamental characteristics of the market economy. These publicly-owned enterprises would still be subject to market sovereignty, would have to acquire capital goods through markets, strive to maximize profits (or at the least try to minimize costs), and utilize monetary accounting for economic calculation.[27]


Elements of a mixed economy[edit]

The elements of a mixed economy in Western countries have been demonstrated to include a variety of freedoms:

A TGV train in Marseille operated by the publicly owned SNCF. In many countries, the rail network is partly or completely owned or controlled by the state.
A mail truck. Restrictions are sometimes placed on private mail systems by mixed economy governments. For example, in the U.S., the USPS enjoys a government monopoly on nonurgent letter mail as described in the Private Express Statutes.
This hospital run by the National Health Service in the United Kingdom. In most countries the state plays some role in the provision of health care.
  • to possess means of production (farms, factories, stores, etc.)
  • to participate in managerial decisions (cooperative and participatory economics)
  • to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
  • to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
  • to sell (same as buy)
  • to hire (to create organizations that create wealth)
  • to fire (to maintain organizations that create wealth)
  • to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
  • to communicate (free speech, newspapers, books, advertisements, make deals, create business partners, create markets)
  • to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)


and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as:

and restricted by various laws, regulations:


See also[edit]

Mixed economic systems[edit]

Further reading[edit]


Sources and notes[edit]

  1. ^ (NB)
    • Schiller, Bradley. The Micro Economy Today, McGraw-Hill/Irwin, 2010, p. 15. "Mixed ecoonomy - An economy that uses both market signals and government directives to allocate goods and resources." This follows immediately from a discussion on command economies and market mechanism.
  2. ^ Pollin, Robert. Resurrection of the Rentier, University of Massachusetts: http://www.peri.umass.edu/fileadmin/pdf/other_publication_types/NLR28008.pdf, p. 141-142: "The underlying premise behind the mixed economy was straightforward. Keynes and like-minded reformers were not willing to give up on capitalism, in particular two of its basic features: that ownership and control of the economy’s means of production would remain primarily in the hands of private capitalists; and that most economic activity would be guided by ‘market forces’, that is, the dynamic combination of material self-seeking and competition. More specifically, the driving force of the mixed economy, as with free-market capitalism, should continue to be capitalists trying to make as much profit as they can. At the same time, Keynes was clear that in maintaining a profit-driven marketplace, it was also imperative to introduce policy interventions to counteract capitalism’s inherent tendencies—demonstrated to devastating effect during the 1930s calamity—toward financial breakdowns, depressions and mass unemployment. Keynes’s framework also showed how full employment and social welfare interventions could be justified not simply on grounds of social uplift, but could also promote the stability of capitalism."
  5. ^ The Challenges of Cuba's Economy - An Interview with Dr. Antonio Romero. Also, India has been a hub for practicing mixed economic structure since its independence. Jawaharlal Nehru was a strong proponent of mixed economy. In 1998 "Transformations have occurred in property ownership, employment systems, and income levels to the extent that today we have a particular kind of mixed economy."
  9. ^ A variety of definitions for mixed economy.
  15. ^ Gardner, Martin. Whys of a Philosophical Scrivener, St. Martin's Press (1991), p. 126
  18. ^ The Library of Economics and Liberty on-line Book titled The National System of Political Economy by Friedrich List
  20. ^ The Making of Modern British Politics, Martin Pugh
  21. ^ Global Political Economy, Robert O'Brien and Marc Williams
  23. ^ a b (Gardner)