What Is a Mixed Economy? Definition & Examples

By Motley Fool Staff – Updated Aug 9, 2025 at 11:17 PM

Key Points

Mixed economies blend free market and socialist elements, balancing efficiency and social welfare.
Advantages include efficient resource allocation and innovation-driven profit, as seen with Apple.
Disadvantages include potential inefficiency from government support and moral hazards in large firms.

What's the most common type of economy? People living in the United States might argue that a capitalist or free market economy is superior to others. Scandinavians might vouch for a socialist approach as the most fair and equitable allocation of capital. People in other parts of the world might argue that a communist economy would ensure the greatest satisfaction for the greatest number of individuals.

The truth, however, is that virtually every place on the planet is a mixed economy that combines elements of different types of economies. Read on for more details about mixed economies.

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Green paper cut-outs of people holding hands around a pile of money. — Image source: Getty Images.

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Bottom line on mixed economies

No economy is perfectly capitalist or socialist. The Soviet Union, whose economy was ostensibly a purely communist creation, introduced free-market reforms as early as the 1920s to help the country recover from its civil war. The United States, ostensibly home to a free market economy, has imposed wage and price controls at various times, most recently to curb inflation in 1970.

While the definitions of economic systems haven't changed much, the balance between capitalism and socialism in a mixed economy is a constantly moving target. Part of the dynamism is due to political environments; part is because governments will often respond to changing economic environments through monetary policy that involves changing interest rates or through fiscal policy that redirects government spending. Policies in mixed economies are far from static, and wise investors will pay attention to how changes can affect their portfolios.

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