Command Economies

What is a Command Eocnomy

Command economies are economies that are run by society's leaders; people like members of the central government are prime candidates to run command economies

Examples of a Command Economy

One of the biggest examples of a command economy historically speaking is the Soviet Union; now known as Russia. An example of a command economy in more recent years is North Korea. In each of these countries some or all of the economy is controlled by the government.

Advantages and Disadvantages

Advantages
  • It provides for everyone (including the sick and old who are economically inactive)
  • It allows for the production of items that may not make money in a market economy
  • It can overcome market failure and inequality
  • It can prevent mass unemployment
  • It can ensure everyone has access to their basic needs

Disadvantages

  • The people who make the economic decisions have little understanding of local conditions and thus make poor decisions
  • Workers have little to no motivation to improve their productivity because their wages stay the same no matter what
  • There is no private property
  • It threatens freedom and liberty by creating a strong central government.
  • Consumers are not able to get what they prefer

The Three Economic Questions

Who Owns the Resources?

In a command economy the government owns all or a large portion of the factors of production. In a communist country all of the resources belong to the government. However, in a socialist country the government owns the basic resources and all the rest are privately owned.

How are resources allocated?

In a command economy resources are primarily allocated through "government planners". They are the ones that run the economy. In a communist country those government planners decide how the resources are used. Whereas, a socialist country would allow government planners to allocate the basic resources and then the market determines how privately owned resources are distributed.

What role does the government play?

In a command economy the government makes some or all of the economic decisions. In a communist country all of the economic decisions are made by the government. Unlike a socialist country where, only the government only makes decisions in the basic industries.

Comment Stream

2 years ago
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You covered every point required and a little beyond. Very well organized with both sides of the advantages and disadvantages that have counter points for each. Listed both Russia and North Korea, while others just stuck with one.

2 years ago
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This is great. Stalin brings it all together...but seriously great use of pictures and more than sufficient amount of information. http://images.clipartpanda.com/smiley-face-clip-art-thumbs-up-clipart-two-thumbs-up-happy-smiley-emoticon-512x512-eec6.png

Open in New Window
2 years ago
0

Great content, and examples

2 years ago
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Solid website with just the right amount of information, the visuals were aesthetically pleasing.