Mixed Economy; Meaning, History, Features, Advantages and Disadvantages
A mixed economy system is a mixture of both capitalist and socialist economic systems. In this economy, the production and distribution of goods and services are decided and controlled by the private and government sectors. One sector cannot operate operation in the absence of another. Both private and public or government sectors play a significant role to develop economic growth. This economy is the combination of price motive and social welfare. Nepal, India, etc. other countries are examples of mixed economy systems.
History of Mixed Economy System
The Mixed Economy system was started in 1917 A.D. Before the Mixed economy system, the world was involved in market economies. After the October Revolution, a socialist economy was introduced in the Union of Soviet Socialist Republic (now present Russia). During the Great Depression in the 1930s, Europe and America faced a tremendous economic crisis in the market economic system. J.M. Keynes suggest public work program for the survival of all market economics because, in a market economy, there was widespread unemployment and poverty. Many countries accepted J.M. Keynes's suggestion.
The definition of a mixed economy system is given by some economists;
According to R.G. Lipsey and K.A. Chrystal, " The term mixed economy refers to an economy in which both capitalist and socialist economy have significant effects on the allocation of resources and the distribution of income."
According to P.A. Samuelson, " Mixed economics rely primarily on the price system for their economic organization but use a variety of government intervention to handle macroeconomic instability and market failures."
Some features of the Mixed Economy System are mentioned below;
i. Combination of public and private sectors: In a Mixed economy system, the production and distribution of goods and services are controlled and decided by the public or government and private sector. One sector cannot operate in the absence of another sector. Both public and private sectors play important role in the development of the economy of the nation. For Example, the Nepal government distributes electricity throughout the nation, and the private sector is also involved in the production of electricity.
ii. Profit motive and Social welfare: These are the major features of a mixed economy system. Profit motive and social welfare come from the capitalist and socialist economic systems. A mixed economy system, it focuses on both profit motive and social welfare.
iii. Economic planning: A most important feature of a Mixed economy is economic planning. The government tries to promote economic development and social welfare through economic planning. The central planning authority formulates both short-term and long-term plans with the help of the private sector.
iv. Individual freedom: In a mixed economy system, every citizen of the nation has individual freedom. Consumers are free to purchase, and demand any commodity they like, As well as producers are also free to produce, and distribute goods, and services according to the consumers' demands. However, the Government put some restrictions keeping in mind the welfare of society and the production and consumption of harmful goods.
v. Measure on economic inequality: In a mixed economic system, the government and private sector play important roles in reducing the inequality gap between rich and poor. For example, the Government and private sectors provide employment opportunities for the poor and needy people of the citizen. Other examples; are a progressive tax on income and poverty, old age allowance, free health care, free education, etc. These rules and regulations help the lower class people to their living standards and help to maintain economic equality.
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Some other features of a Mixed economy system are;
vi. Price mechanism:
vii. Control on monopoly power:
i. Benefits of both the public and the private sectors:
ii. Mutual checks of the public and private sectors:
iii. Rapid economic development:
iv. Economic freedom of choice:
v. Suited to democratic countries:
i. The conflict between private and public sectors:
ii. Difficult in controlling:
iii. Difficult to maintaining a balance: