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What Are the Advantages of a Mixed Economy?

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  • Written By: Daniel Liden
  • Edited By: Jenn Walker
  • Last Modified Date: 03 December 2016
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A mixed economy is an economic system characterized by the inclusion of both public and private business concerns, including both government-planned aspects and free-market aspects. A pure market economy would not include any government-controlled businesses or government regulations, and a purely planned economy would be entirely regulated by the government without concern for market forces. The advantages of a mixed economy mostly arise from the fact that such an economy tends to offer substantial freedom for how to conduct business while imposing regulations that encourage economic stability and preventing some unsavory businesses and business practices. The ability of a government to construct and operate libraries, schools, hospitals, and a variety of important components of infrastructure is another of the major advantages of this type of economy.

The advantages of a mixed economy may vary dramatically based on the manner in which the economy is mixed. For instance, an economy allowing for completely free and market-driven business but that allows government control of infrastructure and of services such as libraries and law enforcement may be considered mixed. Likewise, a strictly regulated economic system with government-fixed prices that allows business owners some small freedom over what they sell and who they hire may also be considered mixed. A well-implemented mixed economy should, however, offer advantages such as economic stability and safety.

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Regulation is one of the main aspects of government planning and control that can lead to the various advantages of a mixed economy. Government regulations are rules that businessmen must follow when conducting business. These rules tend to exist in order to ensure that no one has an unfair advantage when conducting business and that businesses do not deceive consumers. Various forms of regulation are also used to manipulate interest rates and other factors that have widespread effects on the economy. Economic stability and the ability to fairly engage in international trade should be two of the main advantages of a mixed economy of this form, though practical implementation of such regulations often fails.

Various advantages of a mixed economy also arise from the mix of public and private enterprise allowed by such a system. Private individuals are allowed, within the bounds of government regulation, to conduct their businesses as they see fit. Governments, however, are allowed control of various essential services, such as law enforcement and infrastructure, that may otherwise be difficult or impractical to draw profit from in the private sector. Other services such as libraries, utilities, communication, and legal services may also be offered by various mixed economic systems.

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serenesurface
Post 3

Some people think that prices of goods in a planned economy are lower but that's not true. In a mixed economy, consumers get the best quality goods at the lowest prices. This is the main advantage of the system in my opinion.

ddljohn
Post 2

@fBoyle-- I'm not a proponent or opponent of government subsidies but I do feel that some kind of intervention in the economy is necessary.

Just think of it this way, if the economy was completely open and unregulated, all sorts of illegal practices would take place to create monopolies and push smaller firms out of the system. Moreover, foreign firms would become very powerful in our national market and national firms would suffer great losses.

Regulation of some sort is required to keep things fair, and also to protect American companies. If that regulation has to be through subsidies, then I think that's fine. We can't leave the market completely on its own to function.

And I think that Darwin said that those who are most adaptable will survive, not those who are strongest. A mixed economy is the most adaptable system to change. No other market system comes close and this is why it's the best system.

fBoyle
Post 1

I don't see the advantage of government subsidies in a mixed economy. If a firm is in such a bad condition, that it will go bankrupt, then it should. Another firm will replace it. For some reason, the government feels the need to keep some firms afloat when they don't deserve that. I think this is a disadvantage and it's unfair to those firms who are doing better.

I think Darwin's rule applies to an economic market. The strongest should survive.

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