A command economy is a system where the government, rather than the free market, determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale. It is a central feature of communist societies, where the government controls the production and distribution of goods and services.
Centralized Planning: In a command economy, a central authority, usually the government, creates a comprehensive plan that outlines economic goals and directs the production and distribution of resources.
Public Ownership: Most or all means of production, such as factories and resources, are owned by the state. Private ownership is either minimal or nonexistent.
Allocation of Resources: The government decides the allocation of resources, including labor, capital, and natural resources. This often involves setting quotas for production and consumption.
Fixed Prices: Prices of goods and services are set by the government, not determined by supply and demand in the market. This is intended to control inflation and ensure affordability.
Economic Goals: Command economies often focus on achieving specific social or economic goals, such as reducing inequality, increasing employment, or building infrastructure, rather than maximizing profit.
Historically, the Soviet Union and Maoist China are prime examples of command economies. In these systems, the government had extensive control over production and distribution, which allowed them to rapidly industrialize but also led to significant inefficiencies and shortages.
While pure command economies are rare today, some countries still exhibit characteristics of a command economy. North Korea and Cuba have significant government control over their economies, although even these countries are incorporating market elements to varying degrees.
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