What Happened to the Mixed Economy?

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.