What Are Characteristics of a Command Economy?


Quick Answer

A command economy is one in which the government is the chief agent in all major economic actions. The government goes as far as to determine what is to be made, how much is made, how it is distributed and how it is transformed into services the public can use. In many instances, even prices are set by the government.

Continue Reading
What Are Characteristics of a Command Economy?
Credit: Jamie Grill N/A Getty Images

Full Answer

A command economy, also called a planned or centrally planned economy, is one where the government relays top-down directives to the sites of production and exchange. Some of the classic examples of command economies are communist economies, particularly the Marxist-Leninist model used in the former Soviet Union. A command economy is different from a market economy in that the presence of private enterprise and free-market forces are either extremely limited or completely nonexistent.

Proponents of command economies argue that this top-down model is instrumental in preventing abusive monopolies and risks to market stability. Furthermore, such government control is said to create possibilities for distributive justice, where everyone has access to the same grade and quantity of goods and services. Finally, proponents argue that command economies can better regulate the job market, thus preventing problematic levels of unemployment.

Opponents of command economies argue that central planning stifles creativity and limits the range of responses a society can apply reflexively to its own diverse needs. Additionally, opponents claim that in limiting individual and private industry, command economies generate significant impairments to free speech and, ultimately, to human rights. As command economies necessarily build bureaucracies, opponents also say that command economies inevitably become bogged down by distant functionaries and red tape that slow the system and cause it to atrophy.

Learn more about Economics
Related Videos

Related Questions