Mixed economic systems combine market and planned economy attributes to regulate the free market. Planned economies involve government control over resource use and production, while command economies have even more state control. Mixed economies can use both systems and government intervention to regulate industries, but can be less efficient and struggle to respond to consumer demand.
Mixed economic systems are those that use both market and planned economy attributes. There are a few different types of mixed economic systems, with the most common being planned or commanding economies. Below each of these broad headings are a few more types. The aim of mixing capitalist and socialist principles is an attempt to regulate the free market. Individuals who believe in mixed economies generally believe in the restriction of freedom, which prevents people from engaging in their own interests.
A planned economy exists when a government entity makes many important decisions regarding the basic use of resources in the economy. Activities such as collection, distribution and production of goods and services come down to government decisions. Market prices associated with commodities can also come from the government. Here, the natural market forces that normally exist between firms and individuals cannot direct economic activity. Attributes of government control are often heavily involved in mixed economic systems.
Command economies take the principles of a planned economy many steps further in terms of state control. A command economy may rely heavily on socialist or collectivist principles, where rewards earned by firms or individuals go to the state or a collective pool. In short, there is no real protection of personal property, and private use for economic gain faces immense pressure, with the result being an inability to engage in economic self-interest. There is no real economic planning that exists with a command economy. The government or collectivist society simply controls the entire economy.
Nations can create mixed economic systems using attributes of the above two economic systems and a market economy. For example, there may be two main sectors in the economy: public and private. The government owns several companies, while private individuals own other companies. While the two sectors can work with each other, there is also the government’s ability to dominate certain industries if necessary. These systems can also change or alter current market economies through some form of government intervention.
Regulation is often the greatest tool the government wields in mixed economic systems. Governments often try to create fair economic systems without any real concepts being defined. What one individual decides is fair is often subjective, with others seeing justice as immoral or improper. A mixed economy can also be less efficient due to the slow nature of a big government to change policy through its bureaucracy. Responding to consumer demand is also difficult as the government cannot know what the consumer wants or wants.
Asset Smart.
Protect your devices with Threat Protection by NordVPN
