Command Economy Advantages And Disadvantages

II. COMMAND ECONOMIC SYSTEM

A command economy is defined as one in which a centralized government controls all or most factors of production and makes all or most production and allocation decisions for the economy. It is also commonly referred to as a planned economy or a central economy or a centrally planned economy. (9,13) In a command economy, the central government determines what to produce, how much to produce, and the price of the goods when put up for sale. (10)

In order to fully grasp command economies, we must have a clear understanding of communism. Simply put, communism is a social system envisioned by German scholar Karl Marx, under which all means of production and all property is owned by the community collectively, where each person contributes and receives according to their needs and abilities. (11) In its essence, communism strives to relieve individuals of the burden of inequality by giving up their individual freedoms to their central government that will redistribute income and wealth equally to everyone. In theory, it advocates a classless society and the abolition of

One of the more prominent ones is the government’s inadequacy in deciding what to produce. This is usually the result of poor information, for most decision-makers have little to no access to what it truly happening. The miscommunication between government officials and the public is usually the cause in one of the major downfalls of command economies: centralization. (14) This is clearly depicted in history, where the Soviet Union often produced goods that were not used, thus indicating their misallocation of resources. (14) The collapse of the communist Soviet Union in the late 1980s led to the demise of many command economies around the world, even though Cuba continues to have a command economy today.