Explore BrainMass

Mixed Economy

A mixed economy is an economic system that functions with both public and private sectors, thus possessing both qualities of planned and market economies. In a mixed economy, the means of production are privately owned and economic activity is driven by the accumulation of capital. This differs from a free market in that government intervention is implemented through fiscal and monetary policies, in order to manage unemployment and elevate social welfare. A mixed economy contains the qualities of both capitalism and socialism and is therefore a combination of free markets and government intervention.

A mixed economy includes the freedom of being able to privately own means of production and to have authority over the buying and selling decisions. Government intervention exists in state owned services such as schools, hospitals and health services, and by providing subsidies. Governments will also regulate labour and minimum wage laws, intellectual property, and environmental laws. Since both governments and individuals can own resources, the private and public sector can co-exist.

Benefits of market economies are that the cost-benefit analyses made by the government can reduce the social costs of business activities and that the government can ensure that there is a more equal level in income, compared to market economies. The combination of capitalism and socialism overcomes some of the disadvantages within these types of economic systems