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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?