Mixed Economies

Date: 2015-10-07; view: 418.

Command and market economies both have significant faults. An intermediate system has developed, known as mixed economies.

A mixed economy contains elements of both market and planned economies. At one extreme we have a command economy which does not allow individuals to make economic decisions. At the other extreme we have a free market where individuals and businesses exercise considerable economic freedom of choice without any government restrictions. Between these two extremes lies a mixed economy. In mixed economies some resources are controlled by the government while others are used in response to the demand of the consumers.

Technically, all economies of the world are mixed. Some countries are nearer to command economies, while others are closer to free market economies. The aim of mixed economies is to avoid the disadvantages of both systems while enjoying the benefits that they both offer. So, in a mixed economy the government and the private sector interact in solving economic problems. The state controls the share of the output through taxation and transfer payments and intervenes to supply essential items such as healthcare, education, policing, and defence, while private firms produce cars, furniture, electronic items, etc.