A “ Mixed Economy

A “ Mixed” Economy is a mix

between Socialism and
Capitalism. It is a hodgepodge of
freedom and
regulations,constantly changing
because of the lack of principles
involved. A Mixed-economy is a
sign of intellectual chaos.
advantages of freedom without
Government having to give up
its power.
A Mixed economy is always in
flux. The regulations never
produce positive results
because they always force
people to act against their own
interests.
 When a particular policy
fails, it is propped up by
other regulations in the
hopes that more control will
produce better results. Are
so destructive they must
either be removed or the
people must be violently
oppressed to make them
accept it.
Features of Mixed economy
•Individuals and in some case
Government own means of
production.
•Government and Individuals
share the decision making
process
•Government guides and
regulates production of goods
 continued

• Protects Consumers and

workers from unfair policies.
•Most effective economy for
providing goods and services
 Rationale of Mixed
Economy
Neither government nor the
free market economy is
“good”or “evil”. Each has a
scope of situations and
activities for which it is better
suited and a scope of
activities for which it is worse
suited.
 Continued

Extreme efforts to substitute

one for other cause harm.
There may be –and are some
ways to work the two together
much more positively and
constructively.
 Problems with mixed economy
and need for mixed economy
Adam Smith father of all our basic
understanding of free market
economies , Market, left to its own
devices,will do harm instead of good.
He pointed out many of these limiting
conditions, all of them instances
where the Directory just doesn't work
any more or works poorly, so that
people and resources are no longer
 Continued
guided towards their best uses
and are actually taken away from
those best uses, often away from
any positive use at all. Of these
many conditions several are of
considerable special interest to us
right now.
 Indivisibilities
For many commodities and services,
their value cannot be divided up and
assigned by pricing mechanism to
individuals. The free market cannot
provide products an services whose
benefits are indivisible, not with out
considerable direction from some
other, larger, system operating from
out side the market place,
 Cost Externalities
Down stream from the affluent
source or downwind from
smokestack ,some of you reading
this can find this factor easy to
appreciate. The cost/benefit
analysis of individual polluting
firms reflects only their own costs
and not that of neighbors.
 Continued
More generally,cost externalities are
what we see in areas of economic
activity where the doer feels the
benefit but others have to bear the
costs. With other people having to
bear the costs while the doer gets
the benefits,we see a lot of economic
activity which on balance does more
harm than good to overall public
well-being often a lot more harm than
good.
 Continued
In cost externality
situations, things tends not
to get done whose cost to
society as a whole is grater
than the benefits to society
as a whole – often far
greater .
 Benefit Externalities
Where the benefits are felt by
others,but the doer bears the
costs. Shovel the snow in front of
your own house so others can
pass by unimpeded? No way,
most people say,unless
compelled by strongly enforced
ordinance.
 Continued

In benefit externality
situations, things tend not to
get done whose benefits to
society would be greater -often
far greater than their cost
would be ,so that considerable
well-being and positive
opportunity are lost.
 Correctives in the mixed
Economy
The use of incentives- to offset the
distortions in private accounts
created by the externalities, there
by realigning private with public
interests and well –being of the
community – would allow the free
market to operate over much
wider range of conditions than
before, while correcting the public
needs associated with that
 conditions, people will be
generally led to “ do the right
thing” because it is profitable
for them to do so. Over this
wider range of conditions,
people will need LESS
supervision.LESS
regulation,LESS direct
government intervention, and
government itself will be
costing a lot less than before.
1. General tax on all classes of
economic activities which result in
pollution, in proportion to the
seriousness of the pollution. In
order for there to be more carrot
than stick.
2. Those firms are exempted from
that tax where they prove –with the
burden of proof on the firm-that in
this particular instance they in fact
have prevented or stopped the
pollution.
 Continued

With the burden of proof on

the firm, the firm will be
bringing the evidence to the
government, rather than
government having to go
police the polluters.
 Continued
3.Special incentives in form of
tax break to firms to invest in
the means to limit or end their
pollution.
“ Sunset Clause” provide these
tax breaks on a sliding scale-
more if they do it now, some
what less if they do it soon,
considerably less if they do it
eventually.
 This arrangement provides
there by the additional
incentives to make that
investment sooner rather than
later.