An economy under which the government intervenes in certain sectors to compensate for perceived market failure—
whether of growth, efficiency, or distribution.
A mixed economy occupies a position between an unplanned economy with no government interference and a
command economy of the type that prevailed in the former
Soviet Union. In a mixed economy, as in an unplanned economy, prices respond flexibly to supply and demand; competition ensures that firms make intensive use of resources; and
financial constraints rather than quotas or production targets
govern the decisions of firms. As under a command economy, however, a mixed economy nationalizes key industries
(although fewer than under strict socialism) and imposes at
least some central planning (although such planning remains
aggregated at the industry or regional level rather than being
firm-specific). Much coordination of supply and demand remains left to the market. Government intervention is exercised through control over expenditures, taxes, and social insurance such as Social Security; the use of regulatory
authority; the ability to raise or lower barriers to market
entry; and the ability to influence the allocation of investment.
Some economists consider that all Western countries including the United States have mixed economies, especially
during the period between World War II and the 1980s when
the public sector in all such countries expanded sharply.
Other economists, though, apply the label to a narrower
range of nations in which the government has asserted consistent leverage over economic growth. Under this latter definition, mixed economies include those of Taiwan, Singapore,
South Korea, Japan, India, France, Italy, and Sweden—but
not Canada, the United Kingdom, Australia, or the United
States, because the planning that exists in the latter group is
poorly coordinated. One may further distinguish between
types of mixed economies: those under which government
leverage comes from its welfare state role, as in Sweden, and
those under which leverage lies elsewhere—such as a group
or industry that exercises control over the economy.
—Laura Seeley Pangallozzi
References
Carson, Richard L. Comparative Economic Systems. Armonk,
NY: M. E. Sharpe, 1990.