Mixed Economy (What is, Development and Function of the State)

The Mixed economy It is a type of system or model of organizing the economy that is characterized by combining both the action of the public sector of the State, with the action of the markets and their laws of supply and demand. In this way you take control of the economy regional and it is possible to supply the population with the resources it needs for its proper maintenance and sustained development.

In mixed economies, the private sector, made up of companies and family groups, are the ones who set prices in the market. For its part, the State intervenes to balance any imbalance, instability, inequality or shortage.

Put more simply, in a mixed economy there are two sectors that are combined. The first is the sector made up of individuals and companies. The second is the Government sector, while the former acts as a regulatory agent, it corrects it.

This being the case, it is obvious that in the mixed economy the decisions, at least most of them, are made by private agents according to the

laws of supply and demand. Both companies and consumers have the power to decide what to produce, how to produce and where to produce.

On the other hand and simultaneously, the State fulfills a regulatory function. It redistributes wealth through subsidies and taxes, thereby trying to establish a balance in society.

In short, mixed economies combine systems of the capitalist economies and of the planned economies, with this it is possible to minimize the limitations that both could have and correct their possible failures. The United States, Portugal, Canada, India, Norway, Denmark, Hong Kong, Sweden and France are some countries that have a mixed economy.

Development of the Mixed Economy

The mixed economy emerged at the end of the Second World War, caused by the limitations of centrally planned and market economies, economic systems established for the epoch.

Its first steps were seen in some Western European countries and it collected principles from both systems. Therefore, it can be said that it is a combination of both.

To date, many countries have adopted this mixed economy system, however they differ in the degree of interventionist by the State, that is to say that There are countries where the characteristics of market economies predominate and which have slight participation of the public sector, such as in the United States. United.

On the other hand, there are countries in which the planned economy has greater weight, however some sectors allow market activity, as is the case in China.

Lastly, there are economies with balanced participation in both the market and the public sector, as shown by some European countries.

Role of the State in Mixed Economies

It is already known that the private sector and individuals activate the market through the laws of supply and demand. With respect to the State, it participates in this type of economy through:

• The establishment of frame legal to establish healthy activity within the market. For example with the laws of consumer protection, defense of private property and the like.
• The intervention and regulation of failures that may be observed in the market, in order to ensure efficient results.
• Balancing the economy, optimizing the distribution of resources and ensuring a fair distribution of wealth, with the intention of ensuring that all citizens have at least what is necessary to subsist.
• Produce goods, offer services on your own or through third parties. This is really important in the case of activities that by their nature are not profitable for the private sector, such is the case of services provided in very isolated rural areas.
• Other activities that the private sector cannot serve as effectively and efficiently as the government sector. Such as the sewer service or the lighting of public spaces.