Mixed economy
A market is a medium which facilitates the exchange of goods and services between buyers and sellers. A market can be physical or virtual and is defined by the different goods and services exchanged in it.[1] A market facilitates the transactions between two or more parties who exchange goods and services, (most often) money, information, or anything of value to the selling party. The interaction of buyers and sellers in the market determines the supply and demand of the goods and services being exchanged and therefore the price and quality of the goods is also determined.
Mixed Market
A mixed market or, mixed economy is one that incorporates the principles of a capitalist free market to allow for private economic freedoms but attempts to compensate for its negative effects to ensure or improve the social good. Negative effects such as externalities are corrected through government regulation, a measure which free markets avoid because it can create inefficiencies.[2] There is no economy in the world that is a true free market economy or a true centrally planned economy, economies worldwide are mixed economies but vary in terms of government control and market freedom. A mixed economy seeks to maintain the freedom of the market, that is, to allow as much free activity as possible whilst minimizing harm to society as a result.
Effects of Mixed Market Policies
To compensate for undesirable market structures (such as monopolies) of a free market and the effects of such, a government can employ a number of policies and mechanisms to do so. Anti-trust legislation is used to breakup or prevent monopolies or oligopolies from forming and to ensure fair competition in the market to protect consumers. The legislation works by restraining the behavior of firms which would reduce competition in a market such as collusion.[3]
Price controls are sometimes used when the price of a good or service that is deemed to be an essential good or an essential service experiences a rapid or exorbitant rise.[4] Price controls are often used to combat rising prices due to inflation.
Taxes can also be used to limit certain activity which cause negative effects on society such as a tax on carbon to limit the production of goods and services which produce carbon as a byproduct.
The intervention in an economy by a government, while often well intended, can have negative consequences. In the attempt to remedy certain ailments caused by markets, an intervening action may create new or more harm as a result so the debate is often centered on the degree of intervention and the short or long term effects of such action.
For Further Reading
- Polluter pays principle
- Externality
- Pareto Efficiency
- Pareto Improvement
- Emissions trading
- Or explore a random page
References
- ↑ D. Rutherford. Routlege Dictionary of Economics. London: Routlege, 1995, pp. 286.
- ↑ A. Goolsbee, S. Levitt and C. Syverson. Microeconomics. New York: Worth Publishers, 2013, pp. 304, 645.
- ↑ M. J. Trebilcock et al. The Law and Economics of Canadian Competition Policy. Toronto: University of Toronto Press Inc., 2002, pp 39.
- ↑ A. B. Abel, et al. Macroeconomics, 6th ed. Toronto, Canada: Pearson, 2011, pp 516.