Mixed Economy: 3. Empirically - As The Actual Practice of Public Institutions of Solving Social

MIXED ECONOMY
Concept about mixed economy:

At the beginning of the 20th century, the processes of social development have led
to the emergence and rapid development of economic systems of a new type,
called mixed economy. At present, the concept involves the combination of both
competitive and non-competitive mechanisms of creation, distribution and
application of public resources. The term “mixed economy” was introduced to
describe economic systems which match the idea of free market and planned
economy, forming a sort of “mix” of all these element.
The process of emergence and development of a mixed economy can be analyzed
at three levels:
1. scientific – as an idea and its development in a number of concepts,
2. institutional – as the consolidation of these ideas as a system of social, state
and market institutions and the final level is
3. empirically – as the actual practice of public institutions of solving social
problems and groups
Mixed economy is system that combines and contains both aspect of capitalism
and socialism . A mixed economic system protects private property and allows a
level of economic freedom in the use of capital, but also allows for governments to
interfere in economic activities in order to achieve social aims.A mixed economy
has three of the following features of market economy.
 It protects private property.
 It allows the free market and the laws of supply and demand to determine
prices.
 It is driven by the motivation of the self-interest of individuals.
And it has some characteristics of a command economy in some area .It allows the
government to safe guard its people and its market .The government has large role
in the military ,international trade ,National transportation and other
infrastructure .The government creates a central plan that guides the economy.
According to Murad “Mixed economy is that economy in which both government
and private individuals exercise economic control.
According to prof.Samuelsom “Mixed economy is that economy in which both
public and private sectors cooperates”.
This system is followed by many developed and developing country in the
world .Here are some list about the share of government spending as a% of GDP
 Iceland =57%
 Sweden=52%
 France =52.8%
 United Kingdom=47.3%
 India=27%
 Germany=43.7%
 Nepal =19.7%
 Main features of Mixed Economy
 Co-existence of private and public sector: In this type of system we can

see the existence of both public and private sectors. In public sector
,industries like defence,power,energy, basic industries etc. are set up. while
in private sector all the consumer goods industries,agriculture,small-scale
industries are developed. The government encourages both the sectors to
develop side by side .
 Personal Freedom: In this system there is full freedom of choice of
occupation although complete liberty is not given to consumer but at the
same time government can regulate price in public interest through public
distribution system.
 Private property is allowed: In this system of economy any one can have
or can acquire their own private property .It must be ensure that the profit
and property may not concentrated in few pockets.
 Economic plannings: In these systems there is also the role of government
thus government also always tries to promote economic development of
country by bringing out various economical plans and cards.
 Price Mechanism and controlled price: In this system price mechanism
and regulated price operate side by side. Price mechanism refers to the
system where the forces of demand and supply determine the prices of
commodities and the changes therein. It is the buyers and sellers who
actually determine the price of a commodity.Price control is governmental
restrictions on the prices that can be charged for goods and services in a
market. The intent behind implementing such controls can stem from the
desire to maintain affordability of goods even during shortages, and to slow
inflation, or, alternatively, to ensure a minimum income for providers of
certain goods or a minimum wages.
 Profit motive and social Welfare: In this system there are both profit
motive like capitalism and social welfare in socialist economy. The principle
aim of a mixed economy is to maximize social welfare. To remove
inequalities of income and wealth, and unemployment and poverty such
socially useful measures as social security, public works etc are adopted to
help poor.
 Check on economic Inequalities: In this system ,Government takes several
measures to reduce the gap between rich and poor through progressive
taxation on income and wealth. Different kinds helps job opportunity
,concessions, old age pension, free medical facilities and free education are
taken to improve the slandered of poor people thus by this it helps to reduce
economic inequalities.
 Control of Monopoly power: In this system government plays an important
role to control monopoly practices among the private entrepreneurs through
effective legislative measures.
 Types of Mixed Economy:

Generally there are two types of mixed economy and they can be listed
below:
1. Mixed capitalist system or controlled capitalism-
In this economy ownership of means of production is vested in
private sector and government merely controls and regulates the
functioning of the private sector. There is direct control like control on
capital issue, price controls, import control etc. it is also called controlled
capitalism because it is capitalist system and government stands outside
the arena merely controlling its functioning.
2. Mixed socialistic economy –

In this economy ownership of various factor of production lies in
the hand of state. The forces of demand and supply are used for basic
economic decisions. However, whenever the demand is necessary,
government takes action so that basic ideas of economic growth is not
hampered. It can also be divided into
(i) Liberal Socialistic Mixed Economy:

Under this system, the government interferes to bring about timely changes in
market forces so that the pace of rapid economic growth remains uninterrupted.
(ii) Centralised Socialistic Mixed Economy:

In this economy, major decisions are taken by central agency according to the
needs of the economy.
 Advantages of mixed economy-

1. lowers the risk of monopoly on essential goods and services
In a free market economy, there is a chance that a monopoly is formed on essential
goods and services such as salt or transportation. In mixed economy, any such
important marked can be operated by the government
2. low-profit market
A main objective of most business is earning a profit. In some cases, organizations
d not generate profit at all (construction of road or providing social security) or it
takes years for the organizations to start generating profit (such as the electricity
generation market). In such markets, private sector is usually hesitant to invest. So
in these kinds of cases, the government will invest even if it may go into loss as its
main objective is to serve the people.
3. profit as a motivator
Unlike command economy where all the profit is taken by the state, in the private
sector of mixed economy the owners and the investors are the ones who keep the
profit that the organizations make.
Due to this reason, businesses and organizations are more likely to be more
innovative and creative in order to give the best possible goods and services while
making sure there is optimum use of resources and reduction in cost.
4. helps in faster economic development
As both public and private sectors are involved in this economy, the combined
effort of them will always be greater than their individual effort.
5. Encourages less income inequality
In free market economy, the price of goods and the minimum wage are not
regulated as there is no governmental intervention. In mixed economy, the
participation of government is there and they will set the prices of some goods and
services (such as oil in Nepal) and also set the minimum wage rate. These actions
taken by the government contribute to an economy in which less income inequality
is present.
6. Freedom for the private enterprise
Except for the regulations that restrict private organizations from causing harm to
the general public and the economy, they are given freedom to manage their own
businesses, hire and fire when necessary and even change the purpose of their
business. This freedom of autonomy may serve as a motivator to the businesses to
do their work efficiently and effectively.
7. Less possibility of depression (for an extended period of time)
In 1930’s the great depression caused great harm to the economy. Less demand,
less production, high unemployment rate and low wage rate. This situation only
got better after the intervention of government.
If ever the demand is low, the government can step in and buy products in order to
maintain the demand. By doing this, the government may go to loss but it will help
in avoiding the status of economy from degrading.
 Disadvantages of Mixed Economy-
1. Unstability
Some economists claim that mixed economy is most unstable in nature. The
public sector gets maximum benefits whereas private sector remains
controlled. There is difficulty in finding a balance between wealth equality
and market freedom. This problem can lead to lack of social mobility and
wide-scale poverty.
2. Lack of Efficiency
In this system, both sectors suffer due to lack of efficiency. In public sector
it is so because government employees do not perform their duty with
responsibility, while in private sector, efficiency goes down because
government imposes too many restrictions.
3. Delay in Economic Decisions

In a mixed economy, there is always delay in making certain decisions,
especially in case of public sector. This type of delay always leads to a great
hindrance in the path of smooth functioning of the economy.
4. Wastage of resources
This system of economy also hinders maximum use of available resources.
This is primarily because of the government trying to mobilize resources to
produce products and services that are generally beneficial for society, rather
than doing it for the betterment of the economy. The government is more
focused on the welfare of the society more than the economy itself. So, there
is bound to be less than maximum use of resources.
5. Threat of Nationalism
Under mixed economy, there is a constant fear of nationalism of private
sector. As the private and public sectors coexists, the government would
have the ability to own and nationalize any industry. This means that private
entities will have to stay on the psychological apprehension that their
business would be nationalized or taken over by the government. For this
reason private sector does not put into use their resources for the common
benefits
6. Corruption and black marketing
There is always corruption and black marketing in this system. Political
parties and self- interested people take undue advantages from public sector.
Hence, this leads to emergence of several evils like black money, bribe, tax
envasion and other illegal activities. All these ultimately bring red-tapism
within the system.
7. Higher Taxes
Governments are funded through taxation and the revenues earned from
their private or chartered companies. Individuals and corporations are taxed
at various, often progressive levels based on the amount of income received.
More taxes would be required from the people, which can lead to negative
consequences such as decreased motivation in work, as employees see a
large proportion of their earnings going to the taxation agency.

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MIXED ECONOMY

Concept about mixed economy:

 Main features of Mixed Economy

 Co-existence of private and public sector: In this type of system we can

 Types of Mixed Economy:

2. Mixed socialistic economy –

(i) Liberal Socialistic Mixed Economy:

(ii) Centralised Socialistic Mixed Economy:

 Advantages of mixed economy-

3. Delay in Economic Decisions

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