Pros and Cons of Mixed Economy


There is a popular belief in economics that combining the merits of two types of economies, such as capitalist and socialist, can bring better welfare for everyone. Therefore, most modern economies are a hybrid form of capitalist and command economies. While there are advantages of mixed economies, there are some monumental disadvantages too.

Definition: Mixed Economy

A mixed economy is a combination of a free market and a command economy. In mixed economies, there is a scope of government intervention in some specific areas. As a purely capitalist or free-market economy and a pure command economy both fail in providing a greater advantage alone, the idea of a mixed economy emerges.

Mixed economies run on supply and demand like pure market economies. The consumer decides what should be produced. Moreover, there is competition in the free market which leads to better productivity and innovation.

In a mixed economy, the participants have their own self-interests but none can exist without the other. As demand and supply decide the market function, there is an invisible force that runs the markets in a mixed economy. The director of demand arises from the consumer’s end. So, in a mixed economy, like the free market economy, the consumer is the king.

In a mixed economy, however, there is government intervention in areas that are related to social welfare and community service. For example, the areas of healthcare, military, and education can be under government control. These areas are reserved because they are directly related to social welfare and security.

In the contemporary world, most economies are mixed because a mixed economy has all the advantages of a free-market economy with government control in required domains. This means that there is more to gain and less to lose from the economic perspective. That is why mixed economies are so popular.

Advantages of Mixed Economy

A mixed economy has all advantages that are part of a free market.

Most Demanding Market

The mixed economy delivers the goods and services in the most demanding market. This helps the demand and supply equation decide the price rather than any central authority. As mixed economies do not have central planners they can thrive naturally.

Higher Chances of Innovation

In a mixed economy, the market force is more important in business and trade than government intervention. Therefore, there are chances of innovation that bring more profits to the best players. As the best players become profitable, they can invest in other organizations like them as there are no restrictions on investment in a mixed economy. In this manner, good organizations and products gain the advantage in mixed economies which means the consumers get the best products.

Most Competitive and Efficient Producers

The mixed economy favors the most efficient producer. As the consumer demands the best products via competition, only the most competitive and efficient producers occupy the market. As the market share of good products increases, consumers get to avail and consume the best products at cheaper yet affordable prices.

No Loopholes like that of a Free-Market Economy

A mixed economy is also great because it removes the loopholes of a free-market economy. As government controls the important resources and manages industries that are unavoidable for social wellbeing, the citizens get proper care and nourishment in areas like healthcare and education.

Also, as the government controls the defense, there is hardly any chance of mismanagement due to a lack of interest. This assures the safety and security of the economy from external threats.

No Gap Between Rich and Poor

The mixed economy also deletes the gap between rich and poor as the government tends to actively control this process. So, unlike the free market where the deprived ones get less care, they get enough attention in a mixed economy.

Disadvantages of Mixed Economy

Depending on the features of the economy one focuses on, there can be many disadvantages of the mixed economy.

Fear of Big Firms’ Monopolistic Behavior

Firstly, if the control of the government over the economy fails totally, the big firms may start monopolistic behavior. This can be detrimental to society in the long run.

Issues for the Welfare of Society

Moreover, a lack of government responsibility can also create issues for the welfare of society. For example, if the healthcare system in an economy fails, it may create burdens on the shoulders of the citizens. If the defense is provided with less importance, the safety and security of the economy may get compromised.

Excessive Freedom

If excessive freedom is allowed in a mixed economy, the poor and deprived citizens may feel the burden. The wealth accumulation gap may widen leading to dents in social harmony. Therefore, the freedom offered to businesses must be observed very carefully which is not quite possible in a mixed economy.

Issues of Central Planning

The central planning available in mixed economies may lead to troubles too. For example, if the defense system is turned into a subsidized monopoly, it may become a social bottleneck. It can not only create issues of corruption but can turn into oligarchy or subsidized monopolies. If such a system is continued for a long time, it may hurt the economy by making the economy weaker and fragile.

Better Access to Government Via Successful Lobbies

In mixed economies, the bigwigs can have better access to government resources via successful lobbies. So, they may get first preference in all areas of business and trade. This may hurt the economy over a longer period of time.

Moreover, these big firms may need to be bailed out during economic downturns which can strain the resources of the economy away from other needful areas.


The mixed economic system is considered the best economic system in the modern world. Due to the inherent advantages of a free-market economy, mixed economies render better service to the citizens when the governments are active. It is believed that mixed economies can minimize the loopholes of free-market economies and increase the efficiency of the system by tuning the private and public players’ initiatives.

The rise of mixed economies has become especially notable due to globalization. As the corporate firms have turned global, the need for economies to be mixed has gained momentum. A mixed economy supports businesses and international relations better. That is why a mixed economy has become the choice of many in the contemporary world.


1. Why is the mixed economy thought to be the best form of the economy?

Ans. The mixed economy combines the best qualities of free market and command economies. This results in a system that is most stringent for all sections of society. The businessmen can freely run businesses while the other sections of the society can benefit from government intervention in needed areas. Being effective for everyone helps the mixed economy gain the most reputation among economists.

2. Is government intervention an important part of mixed economies?

Ans. Yes. Government intervention is an unavoidable feature of mixed economies. Without government intervention, the economies would turn completely into free-market economies which have many loopholes. Government intervention is also required to balance the requirements of all citizens. Hence, government regulations should be an integral part of mixed economies.

3. Give some examples of mixed economy countries.

Ans. Most countries in the world are now mixed economies. For example, the US, the UK, Germany, Ireland, France, etc., are mixed economies. Moreover, many developing nations such as India, and Brazil are also taking big leaps to become mixed economies. Globalization is making countries increasingly mixed economies.

Updated on: 13-Oct-2022

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