A mixed economy generates adverse circumstances of a milder kind, but in the long run tends to evolve in the direction of totalitarianism. In fact, this propensity is the fatal flaw in any system that attempts to enjoy the benefits of freedom while simultaneously compromising the principles of freedom in certain areas.

Because of "time lag" effects, also known as cybernetic transients, the natural tendencies of both socialist and mixed-economy systems may not always be immediately obvious. When a society shifts from relative freedom to a mixed economy, or from a mixed economy to a totalitarian state, many of the negative consequences we have discussed will not appear overnight. Indeed, some of the most important effects develop only over decades. Likewise, if a free or relatively free political system is instituted, a period of time will be required for both cultural adjustment and economic development. After the fall of the Communist régime in Poland, for instance, American Airlines employees at the Warsaw airport required a full 18 months of retraining in order to approach even the mediocre levels of absenteeism, sobriety, and various measures of customer service that are taken for granted in Western mixed economies. Only after a significant transition period can the full benefits of freedom or relative freedom become apparent.