Q.
b) Explain the advantages and disadvantages of the following economic systems:-
i) Central command system. (5 marks)
ii) Free market system. (5 marks)
iii) Regulated or mixed market system. (5 marks)
(15 marks, 2013 Q1b)
A.
Earlier post on Economic system of mixed economy: a case of Malaysia and arguments on mixed economy as a better form of economic system.
A mixed economy is an economic system in which both the private sector and state direct the economy, reflecting characteristics of both market economies and planned economies.[1] Most mixed economies can be described as market economies with strong regulatory oversight and governmental provision of public goods. Some mixed economies also feature a variety of state-run enterprises.
In general the mixed economy is characterised by the private ownership of the means of production, the dominance of markets for economic coordination, with profit-seeking enterprise and the accumulation of capital remaining the fundamental driving force behind economic activity. But unlike a free-market economy, the government would wield indirect macroeconomic influence over the economy through fiscal and monetary policies designed to counteract economic downturns and capitalism's tendency toward financial crises and unemployment, along with playing a role in interventions that promote social welfare.[2] Subsequently, some mixed economies have expanded in scope to include a role for indicative economic planning and/or large public enterprise sectors.
There is not one single definition for a mixed economy,[3] with it defined variously as a mixture of free markets with state interventionism, or as a mixture of public and private enterprise, or as a mixture between markets and economic planning. The relative strength or weakness of each component in the national economy can vary greatly between countries. Economies ranging from the United States[4][5] to Cuba[6] have been termed mixed economies. The term is also used to describe the economies of countries which are referred to as welfare states, such as the Nordic countries. Governments in mixed economies often provide environmental protection, maintenance of employment standards, a standardized welfare system, and maintenance of competition.
As an economic ideal, mixed economies are supported by people of various political persuasions, typically centre-left and centre-right, such as social democrats[7]or Christian democrats. Supporters view mixed economies as a compromise between state socialism and free-market capitalism that is superior in net effect to either of those.