Advantages and Disadvantages of Mixed Economy

Advantages and Disadvantages of Mixed Economy

Mixed economy is an economic system which is a combination of capitalism and socialism. It includes both private and public sector. With respect to public sector, the industries are owned and managed by state and private enterprise is encouraged to own various means of production. A mixed economic system protects private property and renders economic freedom in the capital usage and allows for governments to interfere in economic activities to achieve social goals.

Advantages of Mixed Economy

There are several advantages of mixed economy as mentioned below:

  1. Encouragement to private sector

The foremost advantage of mixed economy is that it encourages for participation of private sector. It renders an opportunity for the growth of private sector which would result in increase of capital formation within the country.

  1. Provision of freedom

In a Mixed economy, both economic and occupational freedom is rendered and every individual has liberty to choose any occupation of their own choice. Every producer has their own rights in decision making with respect to production and consumption.

  1. Optimum utilization of resources

In this economy, both the private and public sector work for optimum utilization of resources. While public sector works for social benefits, the private sector utilizes the resources for maximization of profit.

  1. Economic planning

There is a great advantage of economic planning in the mixed economy. Government takes initiatives and efforts in efficient planning and controlling the economic fluctuations.

  1. Reduction in economic inequalities

There is a lesser economic inequality in mixed economy.  The government takes robust efforts to control the disparity in the distribution of resources. It helps in reduction in the inequality of incomes and promotes the welfare of the common man.

Disadvantages of Mixed Economy:

  1. Un-stability

Mixed economy is unstable in nature as the public sector gets maximum benefits and private sector gets the least benefits and remains controlled.

  1. Delay in economic decisions

There is a delay in taking certain decisions by public sector as it takes more time for processing and implementation in planning the activities. This delay would result in hindrance in the smooth functioning of the economy.

  1. More wastages

The resources are misused as the part of funds allocated to projects goes to the intermediaries hands. This results in huge wastage of resources.

  1. Corruption and Black marketing

The political parties take undue advantage from public sector and this leads to bribe, black money and tax evasion.

  1. Lack of Efficiency

Both private and public sectors suffer due to lack of efficiency. In public sector, the employees do not perform their duty with responsibility. The government imposes restrictions in form of licenses and control over private sector leading to inefficiency in achievement of tasks.

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