I was talking to a fellow tennis player during a break in a match. I’m at my house in Canada and we’re playing 3-on-3, which sounds weird but is a real thrill.
He told me he is a socialist progressive and said his problem with capitalism is the inequality it creates. With ‘capitalism’ he had in mind the system that both Canada and the US have.
I replied that you cannot say that the current level of inequality is due to capitalism, because we don’t have capitalism; we have a mixed economy.
I have pointed out that the term ‘mixed economy’ is a good term. I came across it in Paul Samuelson’s introductory text in my only economics course at the University of Winnipeg, from 1969 to 1970. (Our text was actually written by Samuelson and Anthony Scott, a Canadian economist at UBC, because Samuelson needed someone who could add something (some of the Canadian content that was about Canadian institutions.) The term was widely used at the time.
But, as I noted to my tennis friend, that term has all but disappeared.
What is the mixed economy. Wikipedia has a nice treatment here.
The entire Wikipedia article is worth reading, but here are the first two paragraphs:
a mixed economy is an economic system that accepts both private companiesAnd nationalized government services, such as public utilities, security, 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 that aims to abolish or privatize most government services, even though it wants to deregulate the economy, and a complete Centrally planned economy that strives for it 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 democracythe Scandinavian modeland that of China socialist market economy.
Governments do many things that reduce inequality and many things that increase inequality. The specific example I gave him of a government institution that almost certainly increases inequality is the government’s near-monopoly on primary schools. Poorer children get a worse education and the teachers’ union, which like the government schools has a near monopoly on the most important input into government schools, namely labor, only makes matters worse.
I hereby announce that I will do my part to bring back the concept of the mixed economy.
UPDATE: I just saw that I posted about this in 2011. Oh yeah. It deserves to be said again, this time in the context of inequality.