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In political economy, elements of a market economy and a socialist economy can be combined into a mixed economy. Most modern countries operate with a mixed economic system; government and private individuals both influence production and distribution. These countries don't have a purely free market or socialist economy.

Economist and social theorist Hans Herman Hoppe wrote that there are only two archetypes in economic affairs: socialism and capitalism. Capitalism carries full protection of private property and free association. Socialism is completely controlled by the state and public goods. According to Hoppe, every real system is a combination of these archetypes.

Historically, there are two trajectories for mixed economies. The first type assumes that private individuals have the right to own property, produce and trade. State intervention takes placed in the name of protecting consumers, providing welfare or supporting important industries. Most western democracies, such as the United States, follow this model.

The second trajectory involves states that evolved from pure collectivist or totalitarian regimes. Individuals' interests are considered a distant second to state interests, but elements of capitalism are adopted to promote economic growth. China and Russia are examples of the second model.

In 1985, political economy theorists Wolfgang Streeck and Philippe Schmitter introduced the term "economic governance" to describe markets that are not spontaneous but have to be created and maintained by institutions. The state, to pursue its objectives, needs to create a market that follows its rules.

This is counter to the ideas introduced by Adam Smith in "The Wealth of Nations." Smith believed that markets were a spontaneous order and that the state could not direct it. Later economists including John-Baptiste Say, F.A. Hayek, Milton Friedman and Joseph Schumpeter would expand on this idea.

There is an inherent challenge in the philosophy of a mixed economy. Socialism and capitalism possess diametrically opposite assumptions. The mixed economy becomes a never-ending balancing act between predictable obedience to the state and the unpredictable consequences of individual behavior.

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Can a country be both a market economy and a socialist economy?

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Market economies and socialist economies differ by their logical underpinnings, stated or implied objectives, and structures of ownership and production. Several philosophical questions lie at the heart of the debate between socialism and capitalism: What is the role of government? What constitutes a human right? What roles should equality and justice play in a society?

Functionally, socialism and free-market capitalism can be divided on property rights and control of production. In a capitalist economy, private individuals own the means of production and the right to profit from them; private property rights are taken very seriously and apply to nearly everything. In a socialist economy, the government owns and controls the means of production; personal property is sometimes allowed, but only in the form of consumer goods.

Socialists and free-market economists tend to agree on fundamental economics the supply and demand framework, for instance while disagreeing about its proper adaptation. Both sides claim that the opposite system of coordination leads to undesirable economic outcomes.

Market economies rely on the separate actions of self-determining individuals to determine production, distribution and consumption. Proponents say that freely floating market prices direct resources towards their most efficient ends. Profits are encouraged and drive future production.

Socialist economies rely on either the government or worker cooperatives to drive production and distribution. Consumption is regulated, but it is still partially left up to individuals. The state determines how main resources are used and taxes wealth for redistributive efforts.

There are many points of contention between these two systems. Socialists consider capitalism and the free market to be unfair and possibly unsustainable. Capitalist economists counter by suggesting that socialism is impractical and inefficient.

For example, most socialists contend that market capitalism is incapable of providing enough subsistence to the lower classes. They contend that greedy owners suppress wages and seek to retain profits for themselves.

Proponents of market capitalism argue that it is impossible for socialist economies to allocate scarce resources efficiently without real market prices. They claim shortages, surpluses and political corruption will lead to more poverty, not less.

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What are the main differences between a market economy and a socialist economy?

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A former speechwriter for Prime Minister Stephen Harper says the Harper governments income-splitting plan is like socialism for the wealthy, and is warning the Tories that the policy is bad politics.

When you really think about income splitting, its the equivalent of state-run socialism for the wealthy, Michael Taube wrote in a column in the Toronto Sun.

A few of us will shift income to get a tax credit directly from the government, paid for by taxpayers. Doesnt have much to do with free enterprise and the private sector, Im afraid.

Taube, who has penned columns in numerous newspapers including the Ottawa Citizen, Toronto Star and the Washington Times, argued the Tories were treading on dangerous ground by enacting policies that turn attention to income inequality.

Conservatives should, as a rule, avoid issues involving potential income disparity. Situations that create winners and losers never work to our advantage. It always looks like were favouring the wealthy, paying lip service to the middle class, and thumbing our noses at the poor, he wrote.

Taubes column came out following a report from the Parliamentary Budget Office that projected the income-splitting plan would benefit only 15 per cent of Canadian households, mostly at the higher end of the income ladder.

The report estimated the plan would cost the federal $2.2 billion annually in lost revenue. It also said the plan would reduce employment in Canada by 7,000, mostly the result of women leaving the workforce as a result of the new tax benefit.

The Tories income-splitting plan will allow couples to shift up to $50,000 of income from one spouse to another to reduce the top tax rate paid on the money. The maximum benefits are capped at $2,000.

Critics point out the tax break does nothing for single-income and single-parent households, and nothing for two-income households where both incomes are similar.

Contrary to popular belief, many Canadian couples dont have huge disparities in their annual salaries. Hence, theyll collect very little of the $2,000 tax credit -- and the ones that do, dont desperately need the money, either, Taube wrote.

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Income-Splitting Like Socialism For The Wealthy,' Former Harper Speechwriter Michael Taube Writes

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Carrick best reads: Income splitting is socialism for the wealthy