Merits of a Mixed Economy:
A mixed economy possesses the following merits:
(i) Proper Allocation of Resources : Economic planning ensures that economic resources of the economy are used in the best possible way.
(ii) Economic Stability : A mixed economy ensures economic stability. It tries to avoid fluctuations in the economy through planning and state regulation. It eliminates over¬production and under-production.
(iii) Advantages of the Market System : The system of mixed economy has all the advantages of both capitalist and socialist economies. It retains most of the institutions of capitalist economy by maintaining private property, inheritance rights, competition, profit motive, value system, independence of enterprise, private initiative, etc.
(iv) Rapid Economic Growth : From the perspective of the underdeveloped economies, the mixed economy pattern is important because it ensures faster economic growth. Mixed economy uses combined resources and energy of private resources and public communes to promote economic resources, achieved with social justice.
(v) Check the Concentration of Economic Power : A mixed economy is capable of examining the concentration of economic power: Monopoly control of industries and their exploitative tendencies are barred. Also, the inequality of government’s income is kept in check through the use of progressive taxation.
Demerits of a Mixed Economy:
A mixed economy suffers from various shortcomings. The main drawbacks of mixed economy are given below:
(i) Conflict Between the Two Regions : One of the serious setbacks of mixed economy is that there can be a competition bitterness and non-co-operation between private and public sectors. In the case of mistrust and non-cooperation, the mixed economy may not work correctly.
(ii) Short term Nature : A mixed economy runs the risk of being short-lived. It cannot continue for a long time. During this time, each of the two areas could try to expand at the cost of each other. If the public sector extends to such an extent that it is able to acquire the private sector, the mixed economy can become a socialist economy.
(iii) Inadequate Operations : The risk of a mixed economy being driven in an inefficient way always esists. Due to excessive regulation and control of the government, the private sector has not been able to function effectively. On the other hand, the government sector is not working efficiently due to lack of initiatives from the bureaucrats and lack of responsibility.
(iv)Poor Performance of the Public Sector : In the mixed economy, the record of poor performance of the public sector makes the economic system suffer from inertia, inefficiency and red tapism. Experience of Indian economy testifies to this fact.
(v) Excessive Rules : A mixed economy is highly likely to give rise to a system of controls and rules. The government wants to regulate private sector by applying excessive control, licensing system, monetary and fiscal control. These excessive controls can be inconvenient, rigid and can promote economic inefficiency.
