Command Economy System
By: Martin Austin
What is Command economy?
Command economy is a type of economic system where the means of production, property, and economic activity is controlled by the government. The government determines the amount of products to produce, and the price of those products.
Because the government has ultimate control of the economy, and the resources a nation has, during times of distress a command economy nation will be able to utilize it's resources more effectively during a time of crisis. Due to this ultimate control, command economies can prevent the abuse of monopolies, and effectively manage workers rights. A command economy can also help maximize social welfare instead of maximizing profit.
Because one body is controlling the economy, one problem that often arises from command economies is that the government officials often do not know what is best for the people. They also cannot provide for a persons individual needs, they have a one size fits all policy when it comes to goods and services. Command economies also are known to be invasive on individual rights, often limiting their freedoms.
The 3 economic questions
What will be produced?- Depending on if a nation is a socialist nation, or a communist nation answers this question. In a communist nation the government decides on everything that is produced, utilizing the natural resources they have. In a socialist nation the government decides on the necessities of the people, leaving the consumer to determine the lesser products or services by demand.
How will it be produced?- Again, this depends if the nation is a communist, or socialist. In a communist nation, all production is regulated by the government, from the land the resources come from to the stores they are shipped too. In a socialist nation the government controls production of basic resources while leaving wants to the individual to produce and transport.
Who will it be produced for?- In most cases in a command economy nation all goods are distributed equally to the people.
The command economy system mostly thrived during the cold war era from eastern Europe into Asia under the influence of the Soviet Union. Today many of those countries are no longer command economy. North Korea and Cuba would be one of the few true command economy nations left.