What is a Mixed Economy?

A mixed economy is a combination of both command and market economy.  Command economy is when the government mostly makes the decisions about the production and distribution of products and services and in a market economy supply and demand of the product and service depends on the seller and the buyer. Prices of goods and services are mostly set by their decisions. 

A mixed economy protects private firms and gives certain economic freedom of using capital but governments can interfere in economic activities to reach social goals. Some of the businesses are owned privately and others are owned by the government in a mixed economy. Both free markets and the government play a role in making economic decisions. 

Canada has a highly developed economy. Canada follows a mixed economic system. Prices are determined by the market demand and some services such as postal service are controlled by the government.

How Mixed Economy Works

A Mixed economy encounters both the features of a market economy and a command economy. Private enterprises are free to set up businesses and profit in the market economy. On the other hand, in a command economy, the government controls the market. The government determines production and sales of goods and services. 

In a mixed economic system, the private sector and public sector both work together. The private sector can have a certain level of economic freedom in the mixed economy. Canada and the United States follow a mixed economic system. Important industries like national defense, and public transportation are relatively publicly owned. The mixed economic system is the most common and feasible in the world. 

Advantages of a Mixed Economy

The main advantage of a mixed economy is it follows both a market and a command economy. Besides those: 

• Resources are assigned where they are needed the most. In a mixed economy, goods and services are distributed where most needed.
• Customers get the best dollar value. It gives the highest profit to the producers.
• It encourages new ideas to meet customer needs creatively and efficiently.
• A Mixed economy creates a competitive market. Customers can have the best price value for what they paid for.
• Government involvement can support key industries like education, defense, and aerospace. 
• Citizens can rest assured, as the government takes care of the major issues.

Canada has a mixed economy. The government and the private citizens both contribute to what happens around the country. 

Disadvantages of a Mixed Economic System

There are some disadvantages of a mixed economy as well. Those are: 

• If the economy gets much freedom, deprived groups will not receive the necessary support from the government.
•  As there will be intervention from both the private and public sectors, large organizations may seek to lobby the government.
• It will be tough to maintain the market equilibrium because of public and private interests. 
• The Decision-making process is complicated in a mixed economy.

History and Criticism of the Mixed Economy

After World War II, the term mixed economy became popular in the United Kingdom. Many policies were associated with it when it was first proposed in the 1930s. 

Classical and Marxist theorists say that the law of value or the capital, drives the economy. Austrian economists disagreed that a mixed economy would not be sustained because of the limited significance of government intervention in the economy. This implies that the mixed economy is unstable and eventually it will move naturally toward a more socialistic authority. Between the late 1800s and early 1900s, most political economists and governments believed that social success would perform best in the free markets economic system. 

Characteristics of a Mixed Economy

A mixed economy is the combination of a market economy with some public features. Prices are mostly set depending on the supply and demand. The government sometimes gets involved in the economy by setting the floor or ceiling price for certain goods.

Some other characteristics of a mixed economy are:

Social Welfare Programs: A mixed economy offers benefits to those who are near or below the poverty level. Many countries provide benefits like medical aid, and public housing to low-earning individuals. Many Western European countries have charitable social welfare programs. In addition, some countries governments provide health care and strong labor protections.

Price Controls and Subsidies: Prices in a mixed economy are usually fixed by the market. But the government can control some prices of certain commodities. Most mixed economies have minimum wage laws to protect the workforce and use subsidies to support farmers. 

Business Regulations: Most of the business activities are managed by the market. Governments may set some rules and regulations to prevent unsafe products. Many mixed economies have certain laws that make the market more competitive. 

Importance of Mixed Economies

Mixed economies are important because they can reduce the loopholes of both market and command economies and they can take advantage of both systems. 

In the market economy, everything is determined by the market. Conversely, in a command economy, the government controls everything. In a mixed economy, the government controls the  monopolies while market forces decide the prices. This combined intervention creates economic growth and public welfare. 

Which Economic System Does Canada Follow?

Canada follows a mixed economy. The economic system of Canada is a combination of both a market economy and a command economy. Canadian individuals can independently work, produce, consume, and invest. In Canada, the economy consists of individuals and businesses that make independent decisions, and the public sector finalizes the production and distribution of goods and services. 

• In Canada, the government owns many state-owned enterprises. It is usually known as crown corporations. Canadian Broadcasting Corporation, Canada Post Corporation, and Canadian Dairy Commission are examples of crown corporations. These enterprises are under the charge of the federal parliament. 
• The Canadian economy allows individuals to own property like land, houses, and businesses. There is no production quantity restriction nor price restriction to sell your products. Business owners have the opportunity to create a competitive, innovative market with quality products and services. 
• The Canadian government intervenes in the economy in some ways. The government takes care of taxation and social welfare programs. These interventions are not that enough as a command economy but they are noticeable enough to as a mixed economy. The Canadian government regulates the food and pharmaceutical industries to ensure harmless living. These regulations include prohibiting unsafe products in the market. 
• The government’s social interventions ensure free healthcare and social security. This includes retirement benefits for retired workers. The combination of both socialist and capitalist features in the Canadian economy makes it a mixed economy.

The mixed economy arose last century in Canada because of government intervention, some investment from the private sector, and free trade. The government sets the policies that promote economic progress and private investment creates competition and innovation. The free trade agreements to global markets triggered the economy. The combination of those factors creates the mixed economy system in Canada.

In the modern world, a mixed economy is considered the best economic system. The advantages it provides, mixed economies give better service to the citizens with the government’s intervention. A mixed economy can lower the gaps between free-market economies and can increase productivity with the involvement of the private and public sectors.