Essay Sample on Mixed Economy

The Market System and the Circular Flow

I am in total agreement with the classification of economic systems described in this chapter. There is the Laizze-faire approach in which the market operates free of government interference with only a limited interference every now and then by the government. Then there is another classification which is the complete opposite of the laizze-faire approach to economy. This is known as a command approach in which the government authorities and regulatory agencies have a firm grip on the economy. Price ceilings and price floors are strictly regulated by the central government. Lastly, the chapter discusses the market system in which the forces of demand and supply are let to reign freely (McConnell, Brue, & Flynn, 2018). This means that the government is completely not involved in the economic system and the prices of commodities are dictated by the forces of demand and supply in the market.

Is your time best spent reading someone else’s essay? Get a 100% original essay FROM A CERTIFIED WRITER!

Save 25%

A mixed economy is a type of an economic system where the private enterprises are allowed to thrive freely but the state exercises a tight grip on some of the country's corporations that are seen as state monopolies. The government takes a keen interest in sectors like infrastructure, defense, basic industries, and public services. The mixed economy is also referred to as the dual economy in which the means of production of various commodities in the economy are shared between the private entities and government agencies. Almost all modern day economies are mixed economies because it is hard for any nation to operate completely from the government side or under private enterprises. The mixed economy combines the market system, the command system, and the conventional economic systems. The approach has advantages in that it combines the merits of the other systems.

The majority of the countries around the world use the mixed economy model of an economic system. This is where the government takes up some functions while the private entity is trades in the other sectors of the economy (McConnell, et al., 2018). A clear case in point is what is happening in China. The country has always used the command model of economic system but it has liberalized some of its economic sectors to allow free enterprise. The effect of this has been an economic boom that has made the country the modern day economic superpower in the universe. Some of the sectors where the government had a tight stranglehold upon were agriculture and manufacturing. However, the country decided to privatize some entities in these sectors which has allowed the economy to thrive. This has opened up the economy in leaps and bounds.

Theoretically speaking, the United States prides itself as the leading market economic system in the world. This is because of the capitalist ideology that the country has always embraced especially in competition with the Russian communist ideology. The capitalist or market economy is the one in which there is no interference by the government agencies with the forces of demand and supply left to dictate the market. However, practically speaking, the United States is a mixed economy because there are roles that the private sector fulfills while the government takes up on some other roles. The private enterprise executes its roles diligently while the government intervenes by going beyond the regulatory or supervisory capacity to offer these services. An example is the defense system that the government cannot leave at the hands of private businessmen because it can compromise the national security of the country.

Reference

McConnell, C. R., Brue, S. L., & Flynn, S. (2018). Microeconomics, 21th Edition. McGraw Hill Book Co.