An economic system in which the government controls a country’s economy. Government planners decide which goods and services are produced and how they are distributed. The former Soviet Union was an example of a command economy. Also called a centrally planned economy.
What is the advantage and disadvantage of command economy?
Command economy advantages include low levels of inequality and unemployment, and the common objective of replacing profit as the primary incentive of production. Command economy disadvantages include lack of competition and lack of efficiency.
Who uses command economy?
The command economy is a key feature of any communist society. Cuba, North Korea, and the former Soviet Union are examples of countries that have command economies, while China maintained a command economy for decades before transitioning to a mixed economy that features both communistic and capitalistic elements.
How is the government involved in a command economy?
Command economy A command or planned economy occurs when the government controls all major aspects of the economy and economic production. In a command economy, it is the government that decides what to produce, how to produce goods and how to distribute goods and services within the economy.
Why is production in a command economy inefficient?
Ultimately, they are driven out of the market by competitors capable of operating more efficiently. Production in command economies is notoriously inefficient as the government feels no pressure from competitors or price-conscious consumers to cut costs or streamline operations.
What are the pros and cons of command economy?
Goods production is not always matched to demand, and poor planning often leads to rationing. Innovation is discouraged and leaders are rewarded for following orders rather than taking risks. Planned economies can quickly mobilize economic resources on a large scale. They can execute massive projects, create industrial power, and meet social goals.
Is the Chinese economy still a command economy?
China has also made the transition from a command economy to a mixed economy – though politically the country still remains communist. Should the government intervene in the economy?
