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Transcript
MixedEconomyModel Definition • MixedEconomy- Aneconomicsystemthat featurescharacteristicsofbothcapitalismand socialism.Amixedeconomicsystemallowsa levelofprivateeconomicfreedomintheuse ofcapital,butalsoallowsforgovernmentsto interfereineconomicactivitiesinorderto achievesocialaims.Thistypeofeconomic systemislessefficientthancapitalism,but moreefficientthansocialism. Features • Amixedeconomymeansthatpartofthe economyislefttothefreemarket,andpartof itisrunbythegovernment. • Thepublicsectorworksalongsidetheprivate sector. • Mixedeconomicsystemsarenotlaissez-faire systems. • Mixedeconomiesstartfromthebasisof allowingprivateenterprisetorunmost business. Advantages • Mixedeconomiesallowmanymorefreedoms thancommandeconomies • Mixedeconomieshaveahighlevelofstate participationandspending • Variousrestrictionsonbusinessaremadeforthe greatergood • UsesofTaxation • UsesofSubsidies • Amixedeconomycancreategreaterequalityand providea‘safetynet’ Disadvantages • Heavytaxes • Excessivecontroloverbusinessescanaddcosts anddiscourageenterprise • Fearofnationalisationwithintheprivatesector • Resourcescanendupbeingusedinwayswhich aren’tusefulfortheeconomy • Youcouldarguethatasneithersectorhasfull freedom,neithercanoperateattheirfull potential. FriedrichHayek • Arguedmajorproblemwiththe economyishowpeople’sactionsare coordinated • Themarketwasspontaneous • Increaseinmoneysupplywoulddrive downinterestratesmakingcredit cheap • Governmentguidedbymajority opinionmadesenseifthatopinion wasindependentfromthe government • Peoplefollowingtheirowninterestsis betterthanbureaucratstryingto constricteconomicdevelopment • Economyworksbestwhenindividual risktakersarefreetoinnovateand allocatetheirresourcesastheyplease andconsumerscanspendtheir moneyastheyplease FriedrichHayek Quotes • ‘’'Emergencies'have alwaysbeenthepretexton whichthesafeguardsof individuallibertyhave beeneroded.’’ • ‘’Themindcannotforesee itsownadvance.’’ • ‘’Wemustfacethefact thatthepreservationof individualfreedomis incompatiblewithafull satisfactionofourviewsof distributivejustice.’’ JohnMaynardKeynes • Keyneswasabelieverin monetarism • Hismajorpolicyviewwasthat thewaytostabilizethe economyistostabilizethe pricelevel • Keynes'best-knownworkwas; 'TheGeneralTheoryof Employment,Interestand Money‘ • Keynesianeconomicsisa theoryoftotalspendinginthe economyanditseffectson outputand inflation. JohnMaynardKeynes Quotes • ‘’Capitalismistheastounding beliefthatthemostwickedest ofmenwilldothemost wickedestofthingsforthe greatestgoodofeveryone.’’ • ‘’Theavoidanceoftaxesisthe onlyintellectualpursuitthat stillcarriesanyreward.’’ • ‘’Ifeconomistscouldmanageto getthemselvesthoughtofas humble,competentpeopleon alevelwithdentists,that wouldbesplendid.’’ MixedeconomycasestudyUK • TheUKeconomyalthoughviewedasamainlycapitalisteconomy hasgovernmentspendingtakingup 47.3%ofGDP. • Mostdecisionsaremadebythemarket • IntheUK,theemphasisisonlettingthemarketmakemost decisionsbecauseofitshighlevelofefficiencyinrespondingto customerpreferences. • However,somedecisionsmustbemadebythegovernmenton behalfofsocietye.g.decisionsaboutmilitaryspending,andpublic education. • BusinessesintheUKarenormallygroupedintoprivatesectorand publicsectororganisations. • InconclusiontheUKhasamixedeconomy,developedthroughfree marketandglobaleconomy,whichisregulatedbytheGovernment topreventmarketfailure.
