I was talking with a fellow tennis player during a break in a game. I’m at my cottage in Canada, and we play 3 on 3, which sounds weird but is a real kick.
He told me that he’s a socialist progressive and said that his beef with capitalism is the inequality it creates. He had in mind by “capitalism” the system that both Canada and the U.S. have.
I replied that you couldn’t state that the current degree of inequality is due to capitalism because we don’t have capitalism; we have a mixed economy.
I pointed out that term “mixed economy” is a good one. I came across it in Paul Samuelson‘s introductory text in my only economics course at the University of Winnipeg, in 1969 to 1970. (Our text was actually authored by Samuelson and Anthony Scott, a Canadian economist at UBC, because Samuelson needed someone who could add some of the Canadian content that dealt with Canadian institutions.) The term was widely used at the time.
But, I noted to my tennis friend, that term has virtually disappeared.
What is the mixed economy? Wikipedia has a nice treatment here.
The whole Wikipedia entry is worth reading but here are the first two paragraphs:
A mixed economy is an economic system that accepts both private businessesand nationalized government services, like public utilities, safety, military, welfare, and education. A mixed economy also promotes some form of regulation to protect the public, the environment, or the interests of the state.
This is in contrast to a laissez faire capitalist economy which seeks to abolish or privatize most government services while wanting to deregulate the economy, and a fully centrally planned economy that seeks to nationalize most services like under the early Soviet Union. Examples of political philosophies that support mixed economies include Keynesianism, social liberalism, state capitalism, fascism, social democracy, the Nordic model, and China’s socialist market economy.
Governments do many things that make inequality less and many things that make it greater. The particular example I pointed out to him of a government institution that almost certainly makes inequality greater is the government almost-monopoly on K-12 schools. Poorer kids get crappier education and the teachers’ union, which, like the government schools, is an almost-monopoly on the most important input in government schools, labor, makes things worse.
I hereby announce that I am going to do my bit to bring back the concept of the mixed economy.
UPDATE: I just noticed that I posted about this in 2011. Oh, well. It deserves to be said again, this time in the context of inequality.
READER COMMENTS
Steve
Jul 23 2024 at 3:31pm
How did you tennis friend respond?
David Henderson
Jul 23 2024 at 9:18pm
Good question. Not a clearcut response. He seemed to ponder. One good sign: when it came our turn to play, he said he would rather talk to me.
Thomas L Hutcheson
Jul 23 2024 at 4:58pm
But since all economies ARE mixed, the phrase has no specific meaning.
Rather than resuscitating “mixed economy,” help get people to stop calling mixed economies “socialism.” It gives socialism a good name as shown by your friend who thinks is is a “socialist.” The USSR and North Kore are socialist. China and Bernie Sanders are not.:)
MarkW
Jul 24 2024 at 11:34am
But since all economies ARE mixed, the phrase has no specific meaning.
That’s not actually true — which are the capitalist elements in the North Korean economy?
But even if all extant economies were mixed, the term and idea are still useful. Once David’s tennis friend acknowledged that the US and Canada were already mixed economies, then the argument is over the degree of government involvement as well as which benefits and downsides of the current situation are a result of too much government intervention vs too little.
nobody.really
Jul 25 2024 at 5:34pm
https://en.wikipedia.org/wiki/Jangmadang
https://www.nytimes.com/2019/02/14/magazine/north-korea-black-market-economy.html
https://en.wikipedia.org/wiki/Prostitution_in_North_Korea
vince
Jul 23 2024 at 7:34pm
Thank you. It’s the term I learned and fits almost every economy in the world. Maybe that’s the problem–it’s become so cliche that it’s being ignored.
Mactoul
Jul 23 2024 at 8:30pm
But can a pure laissez faire economy exist?
Commanding heights of the economy are inevitably coordinated with the state. I think a good historic case may be made for the above proposition.
Even in the 19c hayday of liberalism and free trade, the commanding heights being railways, the railway were built with state support and coordination.
Roger McKinney
Jul 26 2024 at 9:45am
I think until 1913 and the creation of the Fed the US was laissez-faire. The railroads were a small exception.
It’s hard to keep a laissez-faire economy because politicians exist to sell their power to the highest bidder. The Dutch Republic remainEd laissez-faire for the longest because its politicians were the wealthiest in the country and so didn’t need more money. They didn’t campaign because the legislature chose successors to those who died or resigned.
TMC
Jul 24 2024 at 11:06am
A mix of capitalism and socialism, but which one pays for the other. One focuses on production, the other consumption. (Simplistic take, I know) Nice post!
Roger McKinney
Jul 25 2024 at 10:57am
Ludwig von Mises wrote about a mixed economy in Interventionism: An Economic Analysis. He argued that it’s not sustainable because the unintended bad consequences of government intervention into the economy will leads to further calls for ever-increasing intervention until we reach socialism. The US has proven him correct. Most calls for state intervention in the economy are to correct the results of previous interventions.
One might call a mixed economy economic fascism, the real fascism, not what the media calls it. In fascism, the government allows people to retain the paper titles to property while controlling every aspect. Fascism is the most insidious form of socialism because it fools people into thinking they still own the property. But ownership requires control. Property isn’t owned without control. I would characterize the US as democratic fascism light. We enjoyed laissez-faire from our founding until 1913 and the founding of the Fed.
When I studied economics in the 1980s, most people referred to the US as a mixed economy. The election of Reagan caused the mainstream mediato refer to it as wild west no holds barred capitalism.
nobody.really
Jul 25 2024 at 6:04pm
Yeah, Franklin promoted the idea of private fire departments. But they had a bad habit of sabotaging each other while buildings burned—ah, the joys of free-market competition! So very early on tyrannical governments started doing things like imposing building codes to reduce the likelihood of fires, backed up with inspectors and fines, and eventually establishing the fascist hell that we now recognize as the public fire department.
I recall Hayek objected to “socialist judges.” I surmise he would have approved of Clarence Thomas, a rather capitalist judge who seems happy to offer his vote to the highest bidder.
Roger McKinney
Jul 26 2024 at 9:39am
You’re confusing laissez-faire with anarcho-capitalism. Laissez-faire means leave us alone. The state doesn’t regulate businesses beyond punishing theft and fraud.
And because private fire companies didn’t work well when first tried doesn’t mean they can never work. If the state does its job of punishing criminals then those who started fires would be in jail and honest people running the companies. With insurance and contracts there should be no problems with private fire companies.
Besides, are city fire departments perfect? Their unions are like the mafia in thatthey demand higher pay and benefits or they let your city burn. They are enormously expensive and bankrupt many cities.
nobody.really
Jul 26 2024 at 10:26am
And because private fire companies didn’t work well when first tried doesn’t mean they can never work…. With insurance and contracts there should be no problems with private fire companies.
We initially had private enterprise. Now public fire departments predominate. How did that come to pass?
Roger McKinney
Jul 28 2024 at 10:46am
Americans became increasingly socialist.
nobody.really
Jul 31 2024 at 6:46pm
Starting in 1678?
Knut P. Heen
Jul 26 2024 at 7:20am
I don’t like the term “mixed”. I think parallel economies describes it better. There is some part of the economy which is completely unregulated like black markets, newly created markets, etc. Another part of the economy is run like the Soviet Union. Finally, we have the regulated economy as a third type. There is some mixing going on (public sector competing against private sector), but it seems mostly like parallel worlds to me (the public sector mostly supplies different goods from what the private sector supplies).
Comments are closed.