Mixed Economy Guide: 7 Characteristics of a Mixed Economy

There is no one definition of what a mixed economy is, but in modern western economies, it typically refers to an economic system that marries a profit-motivated, capitalist free market economy and the civic welfare concerns of a socialist economy. Countries like the United States, United Kingdom, Germany, France, Russia, and China currently have mixed economies.

Mixed economic systems are typically driven by privately-owned, profit-driven economic entities with some degree of public policy intervention from the state to prevent inefficiency, economic collapse, and unemployment. This means that private enterprises have the economic freedom to claim private ownership of the means of production and seek profit, while governments also have the power to institute economic policies and limit or control economic activities.

Mixed economies also allow the government to intervene in the free market to improve the allocation of resources and promote economic planning, government intervention, and government subsidies in certain fields like mail delivery, libraries, and education.

Because a mixed economy is a blend of a free market and a command economy, it shares many of both traits. Here are some of the characteristics of a typical mixed economy.

• Mixed public-private sector: A mixed economy has both a public sector, composed of governmental institutions, and a private sector, made up of private businesses. The private sector mostly includes consumer goods, small industries, and agriculture run by private companies, while the public sector includes public services like energy and water as well as public services like military defense, law enforcement, and mail delivery
• A mixture of private property and public ownership: Individuals are allowed to own private property in a mixed economy, while the government manages public property, like parks, libraries, and public schools.
• Economic freedom: Citizens can choose their occupations and can start their own businesses with private property in mixed economies, and private companies have power over the market. There are limits, however, as the government has the power to intervene in market forces that may concentrate wealth inefficiently.
• Central planning: Governments can intervene in a mixed economy with regulatory policies like antitrust laws that can help to prevent depression and promote economic growth in the market system. The government can also balance the wealth gaps in the economy between the rich and the poor through free education, job placement, pensions, and more systems that give opportunities to the underprivileged.
• Supply and demand economy: The market in a mixed economy has characteristics of a free market economy, with prices being determined by supply and demand. However, during a time of crisis or shortage, the government can intervene to regulate price surges and mitigate product shortages.
• Profit motives: A mixed economy maintains the profit incentives of a capitalist economy in which companies, private entities, and individuals earn profits through the selling of goods and services. However, public regulation typically prevents too many assets from being concentrated in one person or corporation, as would be the case in a monopoly.
• Social welfare intervention: Governments can intervene in mixed economies to assist citizens for health care, unemployment, housing, social security, child care, and food stamps. This is called a welfare state, or a system of government that assists its citizens with centralized programs.

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