A mixed economy
is an economic system
that includes a variety of
public and government control, or a mixture of capitalism
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
and government regulation (which may include
regulation of the market for environmental concerns
, social welfare
, or state ownership
and management of some of
the means of production
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 States to Cuba 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.
"mixed economy" arose in the context of political debate in the
Kingdom in the postwar period, although the set of policies
later associated with the term had been advocated from at least the
Supporters of the mixed economy, including R. H. Tawney
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
, 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
or public ownership
, toward capitalism
or toward a market economy
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
a command economy
Elements of a mixed economy
The elements of a mixed economy typically include a variety
with tax-funded, subsidized, or
state-owned factors of production, infrastructure, and
and providing some autonomy over personal finances but
including involuntary spending and investments such as transfer payments and other cash benefits
and restricted by various laws, regulations:
and taxes and fees written or enforced
with manipulation of the economy in
- 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
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.
American School (also
known as the National System) is the economic philosophy that
States 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.
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
to promote the growth of productive
enterprises. During this period the United States grew
into the largest economy in the world, surpassing England (though not
the British Empire) by
Dirigisme is an economic policy initiated under
Charles de Gaulle of France designating
an economy where the government exerts strong directive
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 Germany 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.
influence Germany has emerged from desolation and defeat to become
an industrial giant within the European
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
- 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
- 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
- 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.
- Note: Quotes in this section indicate content taken from
the article in question.
- Third Way
- Radical center
- 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
- Nationalization "is the act of
taking assets into state
- 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."
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
- Social Market Economy "The
social market economy seeks a middle path between socialism and
capitalism (i.e. a mixed economy)."
- 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:
- 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
- (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."
- A variety of definitions for mixed
- 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'."
- 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."
- "social democracy". Jason P. Abbot. Routledge Encyclopedia of
International Political Economy. Ed. R. J. Barry Jones. Taylor
& Francis, 2001. 1410
- Gardner, Martin. Whys of a Philosophical Scrivener,
St. Martin's Press (1991), p. 126
- The Library of Economics and Liberty on-line
Book titled The National System of Political Economy by
- The Making of Modern British Politics, Martin Pugh
- Global Political Economy, Robert O'Brien and Marc Williams
- *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