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Command Economy
> Introduction to Command Economy

 What is the definition of a command economy?

A command economy, also known as a planned economy or centrally planned economy, is an economic system in which the government or a central authority exercises significant control over the allocation of resources and the production and distribution of goods and services. In a command economy, the government determines what goods and services should be produced, how they should be produced, and who should receive them.

In this economic system, the government typically owns or controls the means of production, including factories, land, and other productive assets. It formulates detailed economic plans that outline production targets, resource allocation, and distribution goals. These plans are often developed by a central planning authority, such as a planning commission or a central planning board.

The primary objective of a command economy is to achieve specific social and economic goals set by the government. These goals may include promoting social equality, ensuring full employment, achieving rapid industrialization, or fostering national self-sufficiency. The government uses its authority to direct resources towards these objectives, often through the implementation of quotas, directives, and regulations.

In a command economy, prices are typically set by the government rather than being determined by market forces. The government may establish price controls to ensure affordability of essential goods and services or to prevent inflation. It may also use subsidies or taxes to influence consumer behavior and encourage or discourage the consumption of certain goods.

Central planning plays a crucial role in resource allocation in a command economy. The government decides how resources such as labor, capital, and raw materials should be allocated across different sectors of the economy. This can involve detailed production plans, specifying the quantity and quality of output required from each enterprise. The government may also allocate resources based on its assessment of societal needs and priorities.

One of the key characteristics of a command economy is the absence or limited role of market mechanisms. Unlike in a market economy where prices and competition guide resource allocation decisions, a command economy relies on centralized decision-making and administrative directives. This can lead to a lack of flexibility and adaptability in responding to changing consumer preferences and market conditions.

Command economies have been implemented in various forms throughout history, with notable examples including the former Soviet Union, China during the Maoist era, and North Korea. While command economies can achieve rapid industrialization and mobilize resources for specific goals, they often face challenges such as inefficiency, lack of innovation, and limited consumer choice. These challenges have led many countries to adopt mixed economic systems that combine elements of both command and market economies.

In summary, a command economy is an economic system where the government exercises significant control over resource allocation, production, and distribution. It involves centralized planning, government ownership or control of productive assets, and the setting of prices and production targets by the government. While command economies can achieve specific goals set by the government, they often face challenges related to efficiency, innovation, and consumer choice.

 How does a command economy differ from a market economy?

 What are the key characteristics of a command economy?

 How does the government play a role in a command economy?

 What are the advantages of a command economy?

 What are the disadvantages of a command economy?

 How does resource allocation occur in a command economy?

 What is the role of prices in a command economy?

 How does central planning function in a command economy?

 What are some historical examples of countries with command economies?

 How does a command economy impact individual freedoms and choices?

 How does a command economy affect income distribution?

 What role do state-owned enterprises play in a command economy?

 How does a command economy handle unemployment and inflation?

 What are the potential risks and challenges associated with a command economy?

 How does a command economy impact innovation and technological progress?

 How does international trade function in a command economy?

 What are the main criticisms of command economies?

 How does a command economy address environmental concerns?

 How has the concept of command economies evolved over time?

Next:  Historical Development of Command Economies

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