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A mixed economy is an economic system that includes a variety of public and government control, or a mixture of capitalism and socialism.

There is not one single definition for a mixed economy, but relevant aspects include: a degree of private economic freedom (including privately owned industry) intermingled with centralized economic planning and government regulation (which may include regulation of the market for environmental concerns, social welfare or efficiency, or state ownership and management of some of the means of production for national or social objectives).

For some states, there is not a consensus on whether they are capitalist, socialist, or mixed economies. Economies ranging from the United Statesmarker to Cubamarker have been termed mixed economies.

The mixed economy as an economic ideal is supported by social democrats as a compromise between socialism and free-market capitalism, among others.


The term "mixed economy" arose in the context of political debate in the United Kingdommarker in the postwar period, although the set of policies later associated with the term had been advocated from at least the 1930s. Supporters of the mixed economy, including R. H. Tawney, Anthony Crosland and Andrew Shonfield were mostly associated with the British Labour Party, although similar views were expressed by Conservatives including Harold Macmillan.

Critics of the British mixed economy, including Ludwig von Mises and Friedrich von Hayek, argued that what is called a mixed economy is a move toward socialism and increasing the influence of the state.


The term mixed economy was coined to describe economic systems which stray from the ideals of either the free market, or various planned economies, and "mix" with elements of each other. As most political-economic ideologies are defined in an idealized sense, what is described rarely if ever exists in practice. Most would not consider it unreasonable to label an economy that, while not being a perfect representation, very closely resembles an ideal by applying the rubric that denominates that ideal. However, when a system in question diverges to a significant extent from an idealized economic model or ideology, the task of identifying it can become problematic. Hence, the term "mixed economy" was coined. As it is unlikely that an economy will contain a perfectly even mix, mixed economies are usually noted as being skewed towards either private ownership or public ownership, toward capitalism or socialism, or toward a market economy or command economy in varying degrees.

There is not a consensus on which economies are capitalist, socialist, or mixed. It may be argued that the historical tendency of power holders in all times and places to limit the activities of market actors combined with the natural impossibility of monitoring and constraining all market actors has resulted in the fact that, as we understand a "mixed economy" being a combination of governmental enterprise and free-enterprise, nearly every economy to develop in human history meets this definition; though some systems may be so close to being completely one way or the other that to call them mixed is redundant and it is more meaningful just to call them a free market economy or a command economy.

Elements of a mixed economy

The elements of a mixed economy typically include a variety of freedoms:
  • to possess means of production (farms, factories, stores, etc.)
  • to participate in managerial decisions (cooperative and participatory economics)
  • to travel (needed to transport all the items in commerce, to make deals in person, for workers and owners to go to where needed)
  • to buy (items for personal use, for resale; buy whole enterprises to make the organization that creates wealth a form of wealth itself)
  • to sell (same as buy)
  • to hire (to create organizations that create wealth)
  • to fire (to maintain organizations that create wealth)
  • to organize (private enterprise for profit, labor unions, workers' and professional associations, non-profit groups, religions, etc.)
  • to communicate (free speech, newspapers, books, advertisements, make deals, create business partners, create markets)
  • to protest peacefully (marches, petitions, sue the government, make laws friendly to profit making and workers alike, remove pointless inefficiencies to maximize wealth creation)

with tax-funded, subsidized, or state-owned factors of production, infrastructure, and services:

and providing some autonomy over personal finances but including involuntary spending and investments such as transfer payments and other cash benefits such as:

and restricted by various laws, regulations:

and taxes and fees written or enforced with manipulation of the economy in mind.

Relation to form of government

The mixed economy is most commonly associated with social democratic forms of government. However, given the broad range of economic systems that can be described by the term, most forms of government are consistent with some form of mixed economy.

Historic examples

The American School (also known as the National System) is the economic philosophy that dominated United Statesmarker national policies from the time of the American Civil War until the mid-twentieth century as the country's policies evolved in a free market direction. It consisted of a three core policy initiatives: protecting industry through high tariffs (1861-1932) (changing to subsidies and reciprocity from 1932-1970's), government investment in infrastructure through internal improvements, and a national bank to promote the growth of productive enterprises. During this period the United States grew into the largest economy in the world, surpassing Englandmarker (though not the British Empire) by 1880.

Dirigisme is an economic policy initiated under Charles de Gaulle of Francemarker designating an economy where the government exerts strong directive influence. It involved state control of a minority of the industry, such as transportation, energy and telecommunication infrastructures, as well as various incentives for private corporations to merge or engage in certain projects. Under its influence France experienced what is called "Thirty Glorious Years" of profound economic growth.

Social market economy is the economic policy of modern Germanymarker that steers a middle path between socialism and capitalism and aims at maintaining a balance between a high rate of economic growth, low inflation, low levels of unemployment, good working conditions, public welfare and public services by using state intervention. Under its influence Germany has emerged from desolation and defeat to become an industrial giant within the European Union.

Although nominally socialist, the economy of Syria is in practice a mixed economy comprising large state enterprises and small businesses.

Modern U.S. economy

The U.S. is considered a mixed economy. Some examples of this include:

  • A central United States bank.
  • Many cities provide public transit as competition against private options, an indirect form of price control.
  • The United States Postal Service is a public mail service that exists alongside private options such as FedEx or UPS.
  • Most road networks are government built and maintained, although private citizens and companies are allowed to "sponsor" a highway or road to ease some of the financial strain.
  • Public and private schools are available for children.
  • Waste collection and treatment are usually provided as a service by the local government, though most local governments pay private companies to perform the service.
  • State and local governments provide guaranteed police and firefighting support, though private security forces are available.
  • Intercity passenger rail (Amtrak) is a nationalized industry, as are many local trains.
  • American airports are government operated but all American airlines are private.
  • The FDA must test and approve a drug or chemical before it is allowed to be sold on the market.
  • State and Federal governments have minimum wage laws, though several occupations are exempt from the rules, such as wait-staff, who make up most of their income from tips.
  • The government provides a social safety net through methods such as Social Security and unemployment benefits.
  • All Americans over the age of 65 are eligible for Medicare, a public health insurance option.
  • Most agriculture has been subsidized.
  • The Federal government has the power to loan money to failing businesses, in the form of bailouts, as a means of keeping markets afloat and preventing sudden unemployment. These bailouts usually come with significant constraints to prevent the businesses from spending the money frivolously. Some of the strongest criticisms of the recent TARP bailouts were that they had relatively few regulations on how the money could be spent, leading to several whistleblower reports of exorbitant CEO bonuses.

See also

Note: Quotes in this section indicate content taken from the article in question.

  • Third Way
  • Radical center
  • Centrism
  • Distributism
  • Social Democracy "A socialist movement that advocates a mixed economy of private and public ownership combined with a welfare state."
  • Corporatism "Historically, corporatism or corporativism (Italian corporativismo) is a political system in which legislative power is given to corporations that represent economic, industrial and professional groups."
  • Nationalization "is the act of taking assets into state ownership."
  • Privatization "is the act of selling state, public or common assets into private ownership in the form of a business."
  • Pluralism "In a pluralistic society, power and decision-making (and the ownership of the results of exercising power) are more diffused."
  • Public sector "is that part of economic and administrative life that deals with the delivery of goods and services by and for the government."
  • Public-private partnership "a system in which a government service or private business venture is funded and operated through a partnership of government and one or more private sector companies."
  • Statism "is a term to describe any economic system where a government implements a significant degree of centralized economic planning"
  • Welfare state "In many "welfare states", welfare is not actually provided by the state, but by a combination of independent, voluntary, mutualist and government services."
  • Social Market Economy "The social market economy seeks a middle path between socialism and capitalism (i.e. a mixed economy)."

Further reading

  • Barr, Nicholas (“Economic theory and the welfare state: a survey and interpretation.” Journal of Economic Literature, 30(2): 741-803. 1992, a review essay looking at the economics literature
  • Berkowitz, Edward D. (1991) America’s Welfare State: From Roosevelt to Reagan. The Johns Hopkins University Press.
  • Buchanan, James M. (1986) Liberty, Market and State: Political Economy in the 1980s New York University Press.
  • Cronin, James E. (1991) The Politics of State Expansion: War, State and Society in Twentieth-Century Britain. New York: Routledge.
  • Derthick, Martha and Paul J. Quirk (1985) The Politics of Deregulation. Washington, DC: The Brookings Institution.
  • Sanford Ikeda; Dynamics of the Mixed Economy: Toward a Theory of Interventionism London: Routledge 1997

Third way

Sources and notes

  1. (DC) *Mixed economy entry in The Norton Dictionary of Modern Thought by Alan and Trombley, W. W. Norton & Company (1999), p. 535. "A economy in which a substantial number, though by no means all, of the activities of production, distribution and exchange are undertaken by the government, and there is more interference by the STATE than there would be in a MARKET ECONOMY. A mixed economy thus combines the characteristics of both CAPITALISM and SOCIALISM." * Mixed economy entry in The New Dictionary of Cultural Literacy, Third Edition, Houghton Mifflin Company (2002). "An economy that combines elements of capitalism and socialism, mixing some individual ownership and regulation." - *Dlamini, Bongile P. What is an economy anyway? How does it Work? "A mixed economy is an economy containing the characteristics of both capitalism and socialism. In other words, it is an economy with a combination of both the private and the public ownership of means of production, with some measure of control by the central government." * Mixed economy entry in The Language of Money by Edna Carew. "One containing features of both capitalism and socialism. Australia is a mixed economy, with major state-owned enterprises in communications, transport, banking, energy generation and health services, as well as privately owned enterprises in the same areas. In common with capitalist economies such as the UK and New Zealand, Australian governments are reducing these activities by privatizing state-operated businesses. Other examples are seen in eastern Europe and the former Soviet Union, where newly independent states have embraced the principles of private enterprise. China, too, provides a striking illustration of the transition to a mixed economy." *Diane Kendall, Jane Lothian Murray, Rick Linden. Sociology In Our Timesictionary, Chapter 13, Nelson, a divions of Thomson Canada Limited (2004). "A mixed economy combines elements of a market economy (capitalism) with elements of a command economy (socialism)." * Mixed economy entry in Political Dictionary, Executive Clarity (2006). "an economy in which elements from the free enterprise system are combined with elements of socialism. Most industrial economies, now including those in the post-communist world, are mixed economies." * The Failure of Economic Interventionism, Joint Economic Committee Economic Classics, December 1997, No. 2. "With a hubris peculiar to intellectuals and the politicians who expediently latch onto their scribblings, academic and political elites in the West insisted that "socialism prudently applied," by the likes of themselves mostly, could provide a "third path" between pure socialism and capitalism. On this third path, which became known as a "mixed economy," government would selectively and carefully intervene into the free market to "improve" it" *Schlesinger, Arthur Jr. Liberalism in America: A Note for Europeans from The Politics of Hope, Boston: Riverside Press (1962). "The broad liberal objective is a balanced and flexible "mixed economy," thus seeking to occupy that middle ground between capitalism and socialism whose viability has so long been denied by both capitalists and socialists." *Gorman, Tom. The Complete Idiots Guide to Economics, Alpha Books (2003), p. 9"In a market economy, the private-sector businesses and consumers decide what they will produce and purchase, with little government intervention....In a command economy, also known as a planned economy, the government largely determines what is produced and in what amounts. In a mixed economy, both market forces and government decisions determine which goods and services are produced and how they are distributed."
  2. A variety of definitions for mixed economy.
  3. How the U.S. Economy Works article says "The United States is said to have a mixed economy because privately owned businesses and government both play important roles. Indeed, some of the most enduring debates of American economic history focus on the relative roles of the public and private sectors. The American free enterprise system emphasizes private ownership. Private businesses produce most goods and services, and almost two-thirds of the nation's total economic output goes to individuals for personal use (the remaining one-third is bought by government and business). The consumer role is so great, in fact, that the nation is sometimes characterized as having a 'consumer economy'."
  4. The Challenges of Cuba's Economy - An Interview with Dr. Antonio Romero In 1998 "Transformations have occurred in property ownership, employment systems, and income levels to the extent that today we have a particular kind of mixed economy."
  5. "social democracy". Jason P. Abbot. Routledge Encyclopedia of International Political Economy. Ed. R. J. Barry Jones. Taylor & Francis, 2001. 1410
  6. Gardner, Martin. Whys of a Philosophical Scrivener, St. Martin's Press (1991), p. 126
  7. The Library of Economics and Liberty on-line Book titled The National System of Political Economy by Friedrich List
  8. The Making of Modern British Politics, Martin Pugh
  9. Global Political Economy, Robert O'Brien and Marc Williams
  10. *Gill: "By 1880 the United States of America had overtaken and surpassed England as industrial leader of the world.: (from "Trade Wars Against America: A History of United States Trade and Monetary Policy" Chapter 6 titled "America becomes Number 1" pg. 39-49 - published 1990 by Praeger Publishers in the USA - ISBN 0-275-93316-4) *Lind: "Lincoln and his successors in the Republican party of 1865-1932, by presiding over the industrialization of the United State, foreclosed the option that the United States would remain a rural society with an agrarian economy, as so many Jeffersonians had hoped." and "...Hamiltonian side...the Federalists; the National Republicans; the Whigs, the Republicans; the Progressives." (from "Hamilton's Republic" Introduction pg. xiv-xv - published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0) *Lind: "During the nineteenth century the dominant school of American political economy was the "American School" of developmental economic nationalism...The patron saint of the American School was Alexander Hamilton, whose Report on Manufactures (1791) had called for federal government activism in sponsoring infrastructure development and industrialization behind tariff walls that would keep out British manufactured goods...The American School, elaborated in the nineteenth century by economists like Henry Carey (who advised President Lincoln), inspired the "American System" of Henry Clay and the protectionist import-substitution policies of Lincoln and his successors in the Republican party well into the twentieth century." (from "Hamilton's Republic" Part III "The American School of National Economy" pg. 229-230 published 1997 by Free Press, Simon & Schuster division in the USA - ISBN 0-684-83160-0) *Richardson: "By 1865, the Republicans had developed a series of high tariffs and taxes that reflected the economic theories of Carey and Wayland and were designed to strengthen and benefit all parts of the American economy, raising the standard of living for everyone. As a Republican concluded..."Congress must shape its legislation as to incidentally aid all branches of industry, render the people prosperous, and enable them to pay taxes...for ordinary expenses of Government." (from "The Greatest Nation of the Earth" Chapter 4 titled "Directing the Legislation of the Country to the Improvement of the Country: Tariff and Tax Legislation" pg. 136-137 published 1997 by the President and Fellows of Harvard College in the USA - ISBN 0-674-36213-6) *Boritt: "Lincoln thus had the pleasure of signing into law much of the program he had worked for through the better part of his political life. And this, as Leornard P. Curry, the historian of the legislation has aptly written, amounted to a "blueprint for modern America." and "The man Lincoln selected for the sensitive position of Secretary of the Treasury, Salmon P. Chase, was an ex-Democrat, but of the moderate cariety on economics, one whom Joseph Dorfman could even describe as 'a good Hamiltonian, and a western progressive of the Lincoln stamp in everything from a tariff to a national bank.'" (from "Lincoln and the Economics of the American Dream" Chapter 14 titled "The Whig in the White House" pg. 196-197 published 1994 by University of Illinois Press in the USA - ISBN 0252064453
  11. (Gardner)

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