|
Feature |
Capitalist (Market) Economy |
Mixed Economy |
Command (Planned) Economy |
|
Ownership of Resources |
Resources mainly owned by private individuals or firms |
Joint ownership – both private sector and government hold resources |
Almost all resources owned and controlled by the state |
|
Role of Government |
Very limited – ensures law & order, protects property rights, and enforces contracts |
Actively participates in key/strategic sectors; also regulates private sector activities |
Dominant role – decides production, distribution, pricing, and allocation |
|
Decision Making |
Decisions are shaped primarily by the forces of supply and demand in the market. |
Decisions are influenced by both market signals and government guidance. |
Every decision is completely directed and regulated by the central authority. |
|
Profit Motive |
Driving force for individuals and companies |
Private enterprises work for profit, but public enterprises focus more on welfare |
Profit is secondary; achieving government-set targets is the priority |
|
Efficiency vs Equity |
Ensures high efficiency and innovation, but leads to inequalities |
Tries to balance efficiency (through private sector) with equity and welfare (through state intervention) |
Strives for social justice and equality, but efficiency and innovation often suffer |
|
Examples |
United States, Hong Kong |
India, France, United Kingdom |
Former USSR, North Korea |
Simplified Comparison: Capitalist, Mixed and Command Economies
- Capitalist (Market) Economy
- Ownership: Land, factories, and services are primarily owned by individuals or private companies.
- Government Role: The state plays a limited part—its main duties are maintaining law and order, safeguarding property rights, and ensuring contracts are respected.
- Decision Making: Production choices—what, how much, and at what price—are determined by the forces of demand and supply.
- Motive: The driving factor is the pursuit of profit, with competition fostering innovation and efficiency.
- Outcome: Rapid growth and high efficiency, but significant social and economic inequality develops.
- Examples: United States, Hong Kong.
- Mixed Economy
- Ownership: Both the private sector and the government share responsibility for resources and industries.
- Government Role: The state maintains firm control over strategic sectors such as defense, energy, transport, and banking, while also regulating private enterprise.
- Decision Making: Decisions emerge from a combination of market dynamics and government direction.
- Motive: Private firms operate to maximize profit, whereas public enterprises give more weight to social welfare and equity.
- Outcome: This arrangement attempts to balance the strengths of the market with the need for fairness and welfare, avoiding complete dominance by either side.
- Examples: India, United Kingdom, France.
- Command (Planned) Economy
- Ownership: Almost all key industries and natural resources are under the direct ownership of the state.
- Government Role: It is the state that determines what goods and services will be produced, in what amount, and at what price they will be supplied.
- Decision Making: The system functions on centralized planning, leaving little room for demand–supply forces.
- Motive: Profit is secondary; the main focus is on meeting plan targets and ensuring an equal distribution of goods and services.
- Outcome: Inequality is reduced and basic needs are provided, but efficiency, quality, and innovation often decline, leading to shortages.
- Examples: Former Soviet Union, North Korea.
Quick Exam Shortcut
- Capitalist → Market decides, profit-oriented, efficient but unequal.
- Mixed → Joint involvement of government and market forces to maintain equilibrium between progress and public welfare.
- Command → State decides everything, prioritizes equality, but efficiency suffers.