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What is the role of the government in a mixed economy?

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Quick Answer

A mixed economy is comprised of private and publicly owned businesses that are regulated by governmental organizations. In mixed economies, such as the United States, the government is responsible for using laws to control or break up business monopolies.

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What is the role of the government in a mixed economy?
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Full Answer

Governments regulate mixed economies by formulating rules and regulations to protect the producers and consumers in the market. Regulation also serves as a means of ensuring that mixed economies utilize economic resources efficiently and allocate scarce resources in a scientifically responsible manner. Governments plan the necessary production targets in private industries while protecting the defense, public utility services and heavy industries. Economic inequality is also minimized in a mixed economy because income gets redistributed through taxation and government subsidies.

Although the government does have jurisdiction over the activities that take place in a mixed economy, the amount of control the government has is comparably less than in a socialist economy, where most of, if not all of, the market is controlled by the government. Such economies rely heavily on tax revenues and are less likely to benefit from price signals or discipline imposed by market forces. It is for this reason that economists claim that mixed economies are more efficient than economies with substantial government ownership.

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