Mixed Economy

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Mixed economy is referred to the economic system in which both public sector and private sector coexist. In this type of economic system, private sector as well as the state direct the economy and the means of production is shared between them. This economic system exhibits characteristics of both market economy and planned economy. Mixed economy can be best described as the market economy where there is a strong regulatory oversight and which has many government enterprises and government provision of public goods.


The main feature of the mixed economy is that there is dominance of private sector; economic coordination is mainly influenced by markets; the means of production is mainly privately owned; and the driving force for all economic activities is profit making and capital accumulation. However, it is different from the market economy where the government influence is negligible or very minimum. In mixed economy, the influence of government is considerable; the government indirectly influences the economy through various monetary and fiscal policies in order to offset the economic decline and the tendency of capitalism towards unemployment and financial crisis. The government also plays an important role in promoting social welfare. There are many mixed economies that have included public sector enterprises and indicative economic planning.

There are many definitions of mixed economy and all of them focus on the dominance of private sector and private economic freedom combined with a degree of government influence on the markets and government regulations. The degree of influence of each of these components in the national economy varies from one country to another. Both U.S and Cuba are mixed economies but their economies are greatly different from one another. The term mixed economy is also referred to the economies of countries which are known as welfare states like Nordic countries. In countries having mixed economy, the government provides a standardized welfare system, maintenance of employment standards, maintenance of competition and environmental protection.

Mixed economy is considered an ideal economy where there is coexistence of free market capitalism and state socialism and it is supported by all groups of people, because it is superior to both the economies when they are considered individually.

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