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Analysis of Mixed Economy Approach


The mixed economy contains the characteristics of three other models: traditional, market, and command. The definitive version of it is supposed to include the best options from these systems in order to make the living comfortable for the private sector, the government, and the nation. However, in the modern world, the mixed economy has its disadvantages and challenges that question the convenience of its application (Amadeo, 2020). The purpose of this paper is to investigate its benefits and negative aspects in order to provide an overview of its implication in the current circumstances.

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Basis of Mixed Economy

Understanding the functioning of the mixed economy requires the examination of the other models that it includes. The traditional system is concentrated on following the customs and laws that are of historical importance for the authorities and the nation (Amadeo, 2020). In this case, people usually prefer to use barter instead of money and exchange products and goods with each other. Subsistence farming is an essential part of this model as the main activities of human beings are fishing, hunting, and agriculture. It is possible to assume that there is no traditional economy in its initial form in the modern world. Nevertheless, it is still widespread among the tribes in India, South America, and New Zeeland. What is more, several significant characteristics of it are used in developed countries such as the USA or China.

The command economy is one of the most controversial systems that are represented nowadays. For example, it is used by the government of North Korea. Moreover, it existed for many decades in USSR that helped the state overcome two World Wars and create a society with all the needs produced in the country. However, it has crucial disadvantages, such as the existence of a black market, the impossibility of getting any products from the foreign states, and the absence of the international market. Moreover, it is necessary to mention that people suffer from the inability to travel, to have a choice of the place of living and working.

The market economy is concentrated on the needs of the private sector. The law of supply and demand plays a crucial role in the decision-making of the authorities’ representatives (Amadeo, 2020). There is no governmental aid to the business and the nation; the principles of competition and concurrence strongly affect the lives of humans. The examination of the three types of resource allocation is necessary for an in-depth understanding of the origins of the mixed economy and its functioning.

Advantages of Mixed Economy

The mixed economy makes the private sector and the government equal in their abilities to influence the market. On the one hand, the authorities can support unprofitable spheres such as medical care, social needs, and the safety of the country (Amadeo, 2020). This is a part of the command economy where the authorities are responsible for the level of living of the inhabitants. The author claims that this type of influencing the market is also beneficial for the field of military actions where the budget has to be strictly controlled to provide safety to the nation (Amadeo, 2020). On the other hand, there is a risk of the excessive influence of the authorities. For example, they are able to create laws that would have negative consequences for business development.

The traditional economy is mostly beneficial for the functioning of the mixed one as it makes people more loyal to the changes in the structure. The nation always has specific historical aspects of its existence, particular values, and traditions (Amadeo, 2020). The integration of these customs into the modern economy makes it easier to overcome significant financial challenges and gives an understanding of some innovative ideas. The author of the article provides an example of funding royal families (Amadeo, 2020). This case is typical for many countries, such as the United Kingdom, Thailand, and others.

Among the essential benefits of the mixed economy is its automatic allocation of the budget to the real needs of people. In comparison with both traditional and command types where the decision of what to produce depends significantly on the desire of the government, the private sector in the mixed economy plays a crucial role in the market formation. Humans invest their money in things that they truly want to exist and be available for the majority of people (Amadeo, 2020). This characteristic is a part of the market system, where competition has a powerful effect on the business sphere.

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Disadvantages of Mixed Economy

Despite the fact that the mixed economy has several important benefits, it also has significant negative aspects that have to be taken into consideration. The author maintains that there are high risks of government-controlled monopoly or oligarchy system (Amadeo, 2020). The problem is that the authorities are responsible for controlling the functioning of this system. It is possible to suggest that they would prefer to rewrite the laws for their own comfort and profit. It may lead to a decrease in the tempo of market development and unfair competition.


The mixed economy is the best option for the majority of developed countries if it functions correctly. The risk of monopoly or the concurrence is high; however, the solution to this problem is the ability to choose the government representatives that would be interested in making the standard of living better. This type of economy is widespread all over the world because of globalization. In general, it requires several steps of modernization but still rests the perfect solutions for many states.


Amadeo, K. (2020). Mixed economy with pros, cons, and examples. The Balance. Web.

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