Features
of Mixed Economies
1. Co-existence of
private and public sector
The
private sector brings in the advantages of market economy such as freedom of
choice, private property right, and profit motive and price mechanism. On the
other hand, the public sector plans production, maintain law and order and
ensure economic stability in the country.
2. Centralized
Planning
Mixed
economy is a planned economy. There is a central planning authority that fixes
the production targets and allocates resources to attain those targets. It also
co-ordinates both private and public sector.
3. Co-ownership of
industries
Basic
industries like defense, public utility services, and heavy industries are
under public sector with the aim of welfare. Some industries are privately
owned with the aim of maximizing profit, but regulated by the government.
4. Reduction of
economic inequalities
Redistribution
of income and wealth through taxation and government subsidies tend to
eliminate inequalities in income and wealth.
Advantages
of mixed economic system
- The presence of price mechanism helps
to allocate the scarce resources in a scientific manner
- Effective utilization of economic
resources due to prior planning
- The presence of freedom of choice,
profit motive, competition etc. increases the economic efficiency in the
country
Disadvantages
of Mixed Economic System
- Conflict between the sectors and its
aims make it difficult to operate the system
- Social evils like corruption and
black-markets can arise
- Excessive control over private section
and government dictatorship will discourage private individuals and firms
- Dependence on the government kills
efficiency of private sector
What is the role of the government in
a mixed economy (arguments for government intervention).
- The government formulates rules and
regulations to protect the producers and consumers
- It prevents the restrictive trade
practices
- It protects people from fraud and
dishonest labeling of goods
- The government tends to protect
workers and provide employment
- It provides some merit goods and
services as well as public goods and services
- It brings more equal distribution of
income and wealth through taxation and subsidies
- It stabilizes the economy by using
monetary and fiscal policies