Mixed Economic System

AAA

DEFINITION of 'Mixed Economic System'

An economic system that features characteristics of both capitalism and socialism. A mixed economic system allows a level of private economic freedom in the use of capital, but also allows for governments to interfere in economic activities in order to achieve social aims. This type of economic system is less efficient than capitalism, but more efficient than socialism.

INVESTOPEDIA EXPLAINS 'Mixed Economic System'

Most modern economies feature a synthesis of two or more economic systems. The public sector works alongside the private sector, but may compete for the same limited resources.  Mixed economic systems do not block the private sector from profit-seeking, but do monitor profit levels and may nationalize companies that are deemed to go against the public good.

Mixed economic systems are not laissez-faire systems: the government is involved in planning the use of resources and can exert control over businesses in the private sector. Governments may seek to redistribute wealth by taxing the private sector, and using funds from taxes to promote social objectives.

While capitalism allows prices to be set by supply and demand forces and socialism fixes prices through central planning, mixed economic systems allow for prices in some sectors to fluctuate, while fixing other prices, such as energy.

VIDEO

RELATED TERMS
  1. Capitalism

    A system of economics based on the private ownership of capital ...
  2. Economic Value

    The worth of a good or service as determined by people's preferences ...
  3. Keynesian Economics

    An economic theory of total spending in the economy and its effects ...
  4. Economic Rent

    An excess payment made to or for a factor of production over ...
  5. Economic Stimulus

    Attempts by governments or government agencies to financially ...
  6. Shock Therapy

    A sudden and dramatic change in national economic policy that ...
Related Articles
  1. The Economics Of Labor Mobility
    Economics

    The Economics Of Labor Mobility

  2. Mixed Economic System
    Economics

    Mixed Economic System

  3. Understanding Supply-Side Economics
    Economics

    Understanding Supply-Side Economics

  4. Adam Smith: The Father Of Economics
    Economics

    Adam Smith: The Father Of Economics

comments powered by Disqus
Hot Definitions
  1. Elasticity

    A measure of a variable's sensitivity to a change in another variable. In economics, elasticity refers the degree to which ...
  2. Tangible Common Equity - TCE

    A measure of a company's capital, which is used to evaluate a financial institution's ability to deal with potential losses. ...
  3. Yield To Maturity (YTM)

    The rate of return anticipated on a bond if held until the maturity date. YTM is considered a long-term bond yield expressed ...
  4. Net Present Value Of Growth Opportunities - NPVGO

    A calculation of the net present value of all future cash flows involved with an additional acquisition, or potential acquisition. ...
  5. Gresham's Law

    A monetary principle stating that "bad money drives out good." In currency valuation, Gresham's Law states that if a new ...
  6. Limit-On-Open Order - LOO

    A type of limit order to buy or sell shares at the market open if the market price meets the limit condition. This type of ...
Trading Center