Mixed Economy Pros and Cons

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When we talk about mixed economy, it only means that one part of the entire economy is being run and controlled by the country’s government while the other half is left to free market. The truth is that most economies of the different countries all over the world are mixed and they only differ in terms of state intervention.

Mixed economies usually start from giving private enterprises the authority to run majority of the businesses before the government will intervene with specific economic areas, like taxes and inflation protections.

Good examples of countries with mixed economy include Iceland, Sweden, France, the United Kingdom, the United States, Russia, China, and Hong Kong, just to name a few.

However, just like most of the things in this world, mixed economy also has its own share of good and bad sides. So, what are the benefits and the drawbacks that are commonly associated to mixed economy? Which is the better option for most countries? Will it really be a great to a certain nation or will it just pull the state downward?

The 5 Pros of Mixed Economy

Here are some of the notable benefits of mixed economy.

1. Mixed economies help lessen the amount of government control and government regulation that is prevalent in command economies.

2. Most industries and businesses can now be left to the private firms. These private firms are more likely to be efficient compared to firms controlled by the government as they have profit incentive for cutting costs and being innovative.

3. The government has the chance of pursuing policies that will provide a macro-economic stability such as an expansionary fiscal policy during times of recession.

4. Mixed economies help create an improve equality and offer safety net that will prevent the people from suffering absolute poverty. In addition, mixed economies allow people of enjoying financial rewards of entrepreneurship and hard work.

5. Mixed economies allow government regulation in the areas with market failure.

The 3 Cons of Mixed Economy

Here are the drawbacks associated to mixed economy.

1. Socialists are criticizing mixed economy as it allows a lot of market forces that can lead to inefficient allocation and inequality of resources.

2. It can become hard to identify exactly where the government will need to intervene.

3. Free market economists are also criticizing mixed economies as it allows excessive intervention of the government. According to libertarians, most governments are actually very poor economic managers as these are invariably influenced by short term and political factors.

How Do You Feel About Mixed Economy

At the end of the day, the fact remains that the success or failure of mixed economy will still depend on how it is being managed. Even the most ardent of all market economists are arguing that government intervention is definitely needed if only for protecting the private properties. How about you? What do you feel about mixed economy? Do you think it will do your country any good or will it just make the situation even worse?