The need for the mixed economy

“The mixed economy is a social institution, a human solution to human problems. Private capitalism and public coercion each predated modern prosperity. Governments were involved in the market long before the mixed economy. What made the difference was the marriage of large-scale profit-seeking activity, active democratic governance, and a deepened understanding of how markets work (and where they work poorly). As in any marriage, the exact terms of the relationship changed over time. In an evolving world, social institutions need to adapt if they are to continue to serve their basic functions. Money, for example, is still doing what it has always done: provide a common metric, store value, facilitate exchange. But it’s now paper or plastic rather than metal, and more likely to pass from computer to computer than hand to hand. Similarly, the mixed economy is defined not by the specific forms it has taken but by the specific functions it has served: to overcome the failures of the market and to translate economic growth into broad advances in human well-being – from better health and education to greater knowledge and opportunity.”

Jacob S. Hacker and Paul Pierson (2016), American Amnesia: How the War on Government led us to Forget What Made America Prosper, p.7