Government and Business in Mixed Economic System

Government and Business in Mixed Economic System

Introduction

Every country has its own economic system that is designed to fit best with its social needs and demands. A mixed economic system is one that combines the elements of a market and planned economy. A planned economy is one in which most of the decisions regarding production and distributions of products are made by government planners. Whereas, in a market economy such decisions are made by market forces such as supply, demand and prices (Kaliski, 2001). However, regardless of which type of economic system rules the society; the government always has a part in the decisions made either directly or indirectly. In order to better understand the operation of the mixed economy, and its relation with the economic, political and social value systems, in depth discussion regarding the relevant factors is required.

Discussion

Differentiating between Strictly Planned and Market Economies

In order to understand the concept of a mixed economy, and how does the national government play an active role in it; it is vital to first understand how the mixed economy came into being.

Strictly Planned Economy

In certain nations of the world, a strictly planned economic system dominates. In the strictest planned economic systems, the quantities of all goods to be produced such as computers, telephones, cars and airplanes etcetera are decided by the government.

Moreover, the government also decides about how the products would be produced and distributed for availability in the consumer markets. Not only this, but the government even has a right to develop policies regarding which citizens are allowed to consume those products under which circumstances. In other words, a planned economy forms a government controlled web ground, where all the moves are being watched and decided by one dominant party (Hillstrom & Hillstrom, 2002).

Strictly Market Economy

Hillstrom & Hillstrom (2002) propose that in contrast to a strictly planned economy, a strictly market targeted economy gives no rights to the government to make decisions regarding the quantification, production, distribution and consumption of goods. All the above mentioned decisions are made by the forces ruling the market including the stakeholders making market policies.

The Practical View of Things: A Mixed Economic System

Looking at things from the practical point of view, in no nation of the world a strictly planned or a strictly market economy could dominate. Therefore, the strictly dominant sides of the economic system represent hypothetical phenomenon for the understanding of concepts.

In every country, the power of the market and governmental forces are limited at some point because of societal balancing conditions. For instance, if a country calls itself a strictly market economy, it would be wrong because the government would still have a say in the supplement of resources; and also the power to design policies that would indirectly affect the market (Hillstrom & Hillstrom, 2002).

Similarly, a strictly planned economy could not exist because the factors of production exist within the society; and are hugely dominated by market factors making them immune to governmental ...