For any socioeconomic setup, there exist distinct economies. For example, there were the traditional economies which mostly focused on barter trade, market economies, which were more about currency, and the command economy. There is however, a new version known as a mixed economy. This is one that combines all the three economies, that is, the traditional, market as well as command economies. A mixed economy is aimed at taking advantage of all the three types of economies, harnessing these advantages into one set of economic system. Just like the three distinct types of economies, a mixed economy has various advantages as well as disadvantages as will be discussed shortly.
Advantages of a Mixed Economy
A mixed economy protects private property of individuals, entities or corporations. This ensures that there is safety of investments for businesspeople. It also provides for the development and maturity of a free market. A major advantage of this is that it allows for the laws of supply and demand to take root, thereby enabling the market to adjust itself automatically based on the market forces. The good thing about this is that there is no market dictation of prices by any business entity, since there is market liberalism. Goods and services can be distributed in areas where they are deemed essential and required.
Secondly, a mixed economy usually pays back the best producers in the market setup with the highest returns. This is to simply imply that the biggest profits go to the most efficient player in the market. Efficiency to a large extent translates to quality. Therefore, consumers in a mixed economy have the privilege of enjoying the best quality products, since the market players will be in a competition to produce the best possible quality of products. This brings another advantage for the market, since it encourages not only innovation, but also creativity by these players. In the end, they strive to produce quality products but at the lowest prices possible, which is good news for the consumer.
Finally, a mixed economy incorporates a level playing field for both the private enterprises as well as the government. This ensures that the capitalist and socialist aspects of these two respectively, can merge into one productive system. In essence, the government intervenes to ensure that there is a balanced mode of economic growth within such an economy, while also ensuring that not only do these businesses make profits, but also give some of it back to the society through corporate social responsibility. In the end, it is a win-win scenario for both the market players and the people.
Disadvantages of a Mixed Economy
Much of the disadvantages of a mixed economy emanate from the impact of the government on its running. First, since the government is more focused on the welfare of the society more than the economy itself, there is bound to be a less than maximum use of the available resources. This is because the government in most cases will focus its efforts in channeling more resources towards the improvement of the society’s welfare, than towards products and services that improve the economy as a whole. Secondly, private businesses encounter a lot of challenges as a result of the influence of the government through bureaucratic processes or even favoritism, which is usually a mainstay in such an economic system.
Finally, a mixed economy usually results in the concentration and accumulation of wealth in the hands of just a handful of people therein, instead of the entire society. This translates to suppression of the general interests of the people in favor of these few who have control of the markets and hence the economy. Soon, unethical practices can easily set in, as the people also try to muscle their control over such an economy.