Mixed Economy: The Benefits of Galbraith's Approach

[student007]

I'm writing an economics essay, and I'm essentially trying to support the ideal economy. My choices are more government involvement (socialism - keynnes), less government involvement (Capitalism - friedman), and a mixed economy (Galbraith). I'm trying to support a mixed economy. But i just have a few questions:

1) what would Galbraith say about healthcare? (public, private or p3 - i think it would be the latter).
2) how could a mixed economy solve the issues of productivity, distribution of wealth, and multinationals?

I know that a mixed economy is something in between capitalism and socialism (kind of like Canada's economy), but what is it really? Maybe if i had an idea regarding what i asked above, i might know a little more about what exactly galbraith believed.

 

[selfAdjoint]

I'm writing an economics essay, and I'm essentially trying to support the ideal economy. My choices are more government involvement (socialism - keynnes), less government involvement (Capitalism - friedman), and a mixed economy (Galbraith). I'm trying to support a mixed economy. But i just have a few questions:

1) what would Galbraith say about healthcare? (public, private or p3 - i think it would be the latter).
2) how could a mixed economy solve the issues of productivity, distribution of wealth, and multinationals?

I know that a mixed economy is something in between capitalism and socialism (kind of like Canada's economy), but what is it really? Maybe if i had an idea regarding what i asked above, i might know a little more about what exactly galbraith believed.

1) I think Keynes would be against governmant health care. He was more about the government using financial initiatives like "pump priming" or deficit financing to smooth out business cycles. He was not a fan of socialist solutions.

2)There are many different kinds of mixed economies, depending on what functions the government takes over from the private sector. Your example of healthcare is one . Some others:
- The government may pass laws restricting hiring and firing practices, aimed at protecting employees from being fired in business downturns.
- They may enact minimum wages to counter a supposed tendency of employers to offer "what the market will bear" to their workers.
- Pure Capitalism tends toward a "devil take the hindmost" philosophy. Those who cannot find a market for their labor powere are left in utter poverty. Governments may impose taxes on the prosperous in order to fund programs to help these poor people. This amounts to coercing those who benefit from Capitalism to support those who do not.
- The government may take over and run certain key industries, such as the telephone system or railroads. Or it may take a share in specific companies such as auto manufacturers which have a big effect on the economy.

All of these programs have pluses and minuses, and various of them are in place in European countries and the US, all of which can be described as mixed economies.

 

[student007]

Cool thanx. So galbraith would like a two-tier system probably, right?
Furthermore, I'm still a bit confused with respect to productivity. What exactly can a mixed economy do to solve this problem and improve productivity?

 

[selfAdjoint]

A mixed economy can do very little, compared to free capitalism, to improve productivity, at least in a steady-state circumstance. Productivity increases have historically been achieved by working employees harder or replacing employees by machinery. Neither solution is popular with workers, and they vote. So governments are shy of encouraging such things.

It has to be said that economists are currently finding that they don't know as much about productivity as they thought they did. All last year productivity kept going up, although conventional wisdom would have expected it to go down, since the economy was coming out of a recession, and in that phase of the cycle productivity was expected to go down, as employers started hiring and reducing the work loads of their minimal staff. This was a pattern which had not been seen in previous modern cycles.