6 Key Pros and Cons of Mixed Economy

6 Key Pros and Cons of Mixed Economy

by / Comments Off / 9210 View / Mar 28, 2015

The relationship between free market and government regulation is central to how we conceptualize and define a government. From some of the more socialist governments across the northern Europe to controlled governments where there is very little free economy allowed, the nature of an economy can define how people live along with the quality of life within the country.

With that in mind, lets take a moment to take a closer look at mixed economies. Along with defining what a mixed economy is, we will get into the pros and cons associated with this form of economy.

A mixed economy utilizes both free market ideals as well as government oversight. More often then not, the government takes over where the free market does not cover. In addition, the government provides regulations for the market. A framework for how the market operates, a mixed economy mans having oversight over business, allowing for theoretically fair business. As with any system currently in operation, the practical application of a mixed economy of a social structures creates a number pros and cons within the society.

The Pros of a Mixed Economy

1. An Equal Amount of Control
Unlike in command economies where the government is primarily in charge, the mixed economy has less government control and regulation. This provides the private market with freedom to operate, grow, expand, and thrive. Because most business can be left in the hands of a private economy, a great deal of services can be taken care of by groups other then the government. Those services that private companies cannot or should not benefit from, like libraries, utilities, roads, hospitals, and social security can be handled by the government.

2. Private Enterprise Is Allowed To Thrive On its Own
Private businesses can do government jobs significantly more efficiently then the government can. In addition, businesses can allow people to enjoy financial rewards for hard work. With a mixed economy, companies are free to hire and fire as needed, manage their own business, and even change what the purpose of the business is.

3. The Government Can Have A Defined Role as Referee
Leaving business up to private enterprise, the government can instead focus on the regulation of these businesses to improve the stability of the economy and nation as a whole. When done correctly, these policy decisions may at first seem counter intuitive to the interests of businesses, but will provide greater stability in the long run. In addition, a mixed economy allows for a social safety net that provides a bit of safety for people who are hit with hard economic times.

The Cons of a Mixed Economy

1. The Challenge of Finding A Balance
One of the greatest problems with mixed economies is in finding a balance between market freedom and wealth equality. As a result, a number of socialist and progressive thinkers see the inequality of resources as a direct result of the market economy. This can lead to wide scale poverty and a lack of social mobility.

2. Government Going To Far
While the government sometimes does not go far enough, it can also sometimes go to far. Identifying the exact role of the government in private enterprise can sometimes be a guessing game, with unfair practices exhibited on both sides as a result. A primary philosophy of Libertarians is that the government makes a poor manager of economies. With this mentality, any involvement by the government is considered wrong.

3. Excess Taxation And Limited Size
Another problem is that governments may limit the size of large companies due to rules regarding monopolies and anti-trust laws. In addition, these companies may be harshly taxed in order to support other aspects of the economy. Without particular safeguards put in place, the entrepreneurial spirit may be squashed.

Where Can I See An Example Of A Mixed Economy?

The United States economy is one of the best examples of a mixed economy. While the principles of a free market are widely held, there is also government control over many things that businesses cannot be profitable in. The government provides a resource for all individuals regardless of wealth, allowing for equality regardless of social standing. In addition to its role in limiting the scope of private enterprise through regulation, a government can also help spur on research and development into things that would otherwise go un-researched.

In addition, a government can help to protect local companies from companies abroad, securing jobs and a higher standard of living for its population. A popular example of governmental influence in local business is the massive subsidies given to farmers. Throughout the United States. While the mixed economy of the United States is not perfect, it holds within it the power to work towards a more efficient system that better provides resources while allowing individuals the freedom to run their own companies.