Essay Plans

What is the mixed economy?

SYNOPSIS:

POINTS:

  1. A mixed economy system is where there is a mixture of private decision making and central organisation. Private markets, self-interest, competition, income redistribution, state allocation of resources and altruism exist in all societies.

  2. There is a problem in measuring the degree of mix:

     

    1. % of people employed by government
    2. % of government spending as a % of GNP
    3. Role of government in decision areas of what/how and for whom to produce

  3. If public expenditure is taken as a yardstick discrimination must be made between defence (a collective decision) and, for example, social security as the spending of the latter is, up to a point, up to the individual. A growth in social security but a decline in defence would indicate an INCREASE in freedom of choice.

  4. Thus public spending is part collective decision-making and part redistribution (transfer payments). The allocation of these two areas depends on a variety of factors not least the personalities of the government ministers involved.

  5. If % of people employed by the government is the yardstick we must surely consider what those employed people actually DO!! One third of the people employed by the government are engaged in market activity where market prices DO play a role in resource allocation.

  6. The role in decision-making areas would include nationalisation but also current government competition policy. Discussion would include the 1980 Competition Act and could be broadened to include reference to 1992 as a single economic unit and therefore the role of European government.

  7. Consideration should also be given in the problem of 'mixtures' from economy to economy. Taking France as an example, the significant shareholders in industry are often government agencies. Thus ownership is not necessary for industry - part ownership will do. Government help through advice, incentives (regional policy) or straightforward grants will all lead to government influence but it is difficult to tell how mixed this makes the economy.

  8. As the market becomes characterised by either very large firms of small (with new firms in between) it has become easier for the government to influence the private sector. As competition increases so research and development becomes more important. The government often influences this and therefore this makes for more planned control. As defence budgets increase the nature of shipbuilding and aviation industries will also change - even with no formal government ownership.
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