One of the basic economics terms that you should master is the mixed economy. It is an economic system in which two or more economic systems participate, but the clear difference is that these systems are different and even contrary to each other.
But What is the mixed economy? What characteristics does it have? What is it for? What advantages and disadvantages does it offer? If you are wondering then it is time to give you the keys so that you understand it 100%. And below you have all the information you need to know about it.
What is the mixed economy
The mixed economy is defined as a economic system in which two types of economy subsist, on the one hand the private company and, on the other, the public. In other words, we are talking about a system in which private and public companies coexist at the same time, in such a way that, although they are contrary to each other, the economic system is made up of them. In this way, they both have a certain freedom, until it starts to interfere with the other, of course.
In this case, the mixed economy allows the private sector to act freely, but the public sector, which can also act, is at the same time regulator and corrector. In other words, if the private economy does something it should not, the public sector can censor or even fine the first person for such actions.
What are the characteristics of the mixed economy?
Now that you know more about what the mixed economy is, it is time to think about its characteristics, many of which have already been discussed. To make things clearer, you should know that:
- There is both the public and private sectors. The relationship between them must be one of coexistence, in such a way that one does not exist without the other and vice versa. What does each of them do? Well, those of the public sector are in charge of building defense organizations, basic industries, energy ... (in other words, institutions that are going to be used by the private sector). In the second case, the industries that are created will be those of goods and consumption, agriculture, livestock, the tertiary sector ...
- There is a certain freedom. Although it is said that there is total freedom, or full freedom, it is not exactly like that you can that the public sector, through the Government, can regulate certain aspects of the private sector, in such a way that it would intervene in it.
- There is the existence of a private property. Of course, before there must be an equitable distribution, both of income and wealth. In other words, it is intended that everyone can achieve the same benefits, income or the ability to have a private property.
- Coexistence of profit and social welfare. In a mixed economy you will be able to see a system based on profit, that is, on working to achieve an economic benefit). However, you can also find a social welfare, that is, a system in which a better quality of life is promoted.
- Minimize economic inequalities. Whose objective is none other than to reduce the gap that exists between rich and poor. That is, create a "mean" population rather than extremes.
What functions does the mixed economy perform?
As you can see, the mixed economy can be a system that works. In fact, hay countries in which it applies, such as the United Kingdom or China (despite the fact that here many times it has been considered a socialist economy).
In the UK, for example, the government takes care of the health care part of the country, offering coverage, employing doctors and hospitals, etc. For their part, private industries are those that deal with consumer goods.
And something similar happens in China, although its model is said to be that of a modern mixed economy, with a highly centralized government and control even in productive companies (of goods and consumption).
All this makes us think about what the functions carried out by a mixed economy and these are:
- A good relationship between the public and private sectors. For this, it is the State that, with the enactment of a series of laws, manages and makes both sectors function correctly.
- Make economic decisions based on the law of supply and demand.
- In the event of market problems or failures, it is the State (Government) that would act and its decision must be followed by all.
- The State itself is also responsible for producing goods and services. But not just any, but those that are not profitable for companies, such as telephony, electricity, water, etc.
- Guarantee a minimum to survive. That is, to achieve an equal distribution system so that everyone has a sufficient minimum to survive.
Advantages and disadvantages
It is clear that the mixed economy can have many advantages for both companies and the public sector. But at the same time there are downsides.
Brianda and advantages, the ones that stand out the most are:
- A freedom for companies, since they can manage and administer their businesses. In addition, that allows them to obtain benefits and rewards for their work.
- The fact of having that freedom and at the same time a certain competitiveness, makes them constantly innovate in favor of the buyers, so they always try to satisfy the customer.
- There is a greater variety of choice, since there may not be just one company, but several.
- In addition, the earnings are intended to be similar and controlled for the markets.
Now, among the drawbacks that must not be lost sight of we have:
- A need for constant control and balance, something that not many can achieve. Not only by the public sector, but also by the private sector.
- There is a certain uncertainty. And the fact is that the presence of the Government, makes many see it as an interference of this and that "freedom" is restricted by the actions of this.
- There are a greater number of taxes and these are higher. This is because the Government puts its guarantees first.
Is it clearer to you now what the mixed economy is?