What are the disadvantages of mixed economy system?

Answer 1

The disadvantages of a mixed economy really depend on how "mixed" it is. For instance, if it is mixed more towards a free-market, there is little regulation (some may see this as a good, though), but if it is mixed more towards a command economy, the control may stifle growth.

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Mixed economies can also have different characteristics. For instance, mixed economy A maybe high tax low regulation while mixed economy B might be low tax and high regulation. Each of these will share a different set of disadvantages. A will stifle profits due to it's high tax structure, but will encourage new ideas due to its low regulation (this could result in many weird effects such as an economy comprised almost solely of small, well-niched businesses). B will encourage profits, but due to its regulation, some new ideas (and some growth) will be stifled. For instance, if environmental regulations are strict, the building of new plants or refineries might be lowered. This could result in a small number of very large and profitable businesses.

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The key is to find a balance amongst the many facets of economies (mixed economies are not limited to the two dimensions mentioned in this answer - regulation and taxes. There are many many more ways to fashion a market structure) the both encourages growth and supports the beliefs of the populace that are governed by it.

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Disadvantages of mixed economy system are the following:

1. It's efficiency property reduces in progressively higher degree, the more its mixed nature embraces more and more of government / state intervention and State planning and reduces the reliance on competitive market economy management mechanisms.

2. Mixed economy system has a natural tendency to move further and further away from reliance on competitive market mechanism to greater and greater bureaucratic controls and interventions until the system efficiency goes down to zero and the system breaks down or dictatorships get fairly established to hide inefficiencies and remove all economic and political freedom from the citizens.

3. Mixed economy systems tend to encourage more state monopolies, higher and higher tax to GDP ratio and dominant public finances, making the Govt. the overwhelmingly large economic player as compared to corporate or individual entities.

4. Mixed economic systems often turn into closed economies hindering international trade and globalization and depriving citizens from he benefits of an interdependent world economies.

5. Mixed economic systems incentivises corruption and political-bureacracy-capitalist nexus enjoying at the cost of the citizens.

6. Mixed economic systems delivers neither efficiency goals achievable through competitive market system nor do they bring about fast reduction in poverty incidence and socialistic societiesPeople can't make their own decision s.

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Government has lots of control over youI

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it is not helpful in achieving optimal use of national resources