1. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar 1 MIXED ECONOMY Mixed economy is that type of economic system in which government exercises a broad control over the economy; itself undertaking some basic economic activities through public sector, and also allowing a major role for private sector

2. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar2 MIXED ECONOMY Mixed economy is an economic system, which is a combination of capitalistic economic freedom and the principles of socialistic control.

3. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar3 MIXED ECONOMY Mixed economy is a mixture of two opposite economic systems i.e. capitalism and socialism. During nineteenth century all countries had free market economies and the government intervention was quite small. With the passage of time the evils of capitalism such as unemployment

4. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar4 MIXED ECONOMY inequalities in distribution of income and wealth and business cycles became quite clear. In the beginning of 20 th century as a solution to the evils of capitalism, some countries adopted socialism Initially socialism appeared very successful

5. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar5 MIXED ECONOMY Many countries increased their rate of growth Unemployment and inequalities in the distribution of wealth decreased Eventually people’s choices were ignored and rate of development declined.

6. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar6 MIXED ECONOMY Now there is neither pure capitalism nor socialism in any country of the world but a combination of the two economies i.e. capitalism and socialism.

7. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar7 MIXED ECONOMY SALIENT FEATURES Public and private sectors co-exist Public and private sectors co-exist Price mechanism works through forces of demand and supply as in capitalism. How ever some time government interferes in economic activity Price mechanism works through forces of demand and supply as in capitalism. How ever some time government interferes in economic activity Private sector is regulated to check monopolies Private sector is regulated to check monopolies

8. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar8 MIXED ECONOMY Freedom of consumer’s choice is available to a very large extent Freedom of consumer’s choice is available to a very large extent Protection of rights of labour and or weaker classes of society is the responsibility of the government Protection of rights of labour and or weaker classes of society is the responsibility of the government Planning of the economy is undertaken in a broad way Planning of the economy is undertaken in a broad way Indirect regulation of the economy is done Indirect regulation of the economy is done

9. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar9 MIXED ECONOMY through monetary and fiscal policies through monetary and fiscal policies Most of the means of production are in private ownership Most of the means of production are in private ownership

10. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar10 MIXED ECONOMY MERITS 1) Democratic :- Very large part of the economy is run through private enterprise. The government encourages people’s participation and makes economic policies in consultation with private sector

11. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar11 MIXED ECONOMY 2) Efficient:- The system ensures optimum use of national resources. The individuals and private business firms are engaged in directly productive activities. People work whole heartedly Efficiency in private sector increases because of government sector.

12. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar12 MIXED ECONOMY 3) Equality of opportunity:- Mixed economy adjusts the scope of public sector and the government regulates private businesses in such a way that opportunities for individual enterprise are spread to all sections of the society and all regions of the country 4) Human freedom:- Mixed economy provides social and economic atmosphere which allows

13. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar13 MIXED ECONOMY free working of the people. free working of the people. 5) Flexible:- There is no clear boundary between public and private sectors. It is the circumstances prevailing in a country and the stage of economic development reached which determines that what economic activities can be entrusted to private and public sector.

14. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar14 MIXED ECONOMY 6) Long run interest of the economy:- On one hand private sector tires to produce maximum amount of goods and services for current use, while on the other government looks after the requirements of long run economic growth and general welfare of the society in future. 7) Supports sound policies:- A strong middle

15. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar15 MIXED ECONOMY class exits because of the co-existence of public and private sector. Excessive concentration of political power is discouraged Government can not misuse the economic resources

16. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar16 MIXED ECONOMY DEMERITS 1)Conflict between private & public sector:- A conflict of interests can arise in those sectors where government and private sector co-exist which may be harmful for the economy. 2)No definite shape:- Some governments may like to keep too much economic units in governments hands while some other government may try to keep too few economic

17. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar17 MIXED ECONOMY activities under government control activities under government control 3)Evils of private ownership of means of products:- The evils of private owner ship of means of production may continue. There may emerge large firms which may be able to influence government policies to promote their private interest and the interest of common man may be ignored.

18. M. Jamshed Khan, Dept. of Economics, Edwardes College Peshawar18 MIXED ECONOMY CONCLUSION If the principles and performance of mixed economy are studied, it can be concluded that it is preferable to both capitalism and socialism. It ensures maximum efficiency and is, acceptable to people, flexible, and practicable. It is not simply an ideal theory of an economic system but a practical realty all over the world.