While command economies are capable of rapidly making sweeping changes in a country’s economy and society, their inherent risks, such as overproduction and stifling of innovation, have driven many long-time command economies like Russia and China to incorporate free market practices in order to better compete in the global marketplace. While command economies are typical of both communism and socialism, the two political ideologies apply them differently.In the Communist Manifesto, Karl Marx defined command economy as “common ownership of the means of production.”.In nations with command economies, health care, housing, and education are usually free, but the peoples’ incomes are controlled by the government and private investment is rarely allowed.In a command economy, the government determines what goods and services will be produced and how they will be sold according to a multi-year central macroeconomic plan. The command economy is a type of system where the government plays the principal role in planning and regulating goods and services produced in the country.Without wasting too much time let’s jump on the disadvantages of a command economy. This differs from a centralized planned economy, or a command economy, in that micro-economic decision making, such as quantity to be produced and output requirements, is left to managers and workers in state enterprises or cooperative enterprises rather than being mandated by a comprehensive economic plan from a centralized planning board. All businesses and housing are owned and controlled by the government. So, the command economy is an economic system in which the means of production are publicly owned and economic activities are controlled by a central authority. A market economy is an economic system where two forces, known as supply and demand, direct the production of goods and services.Market economies are not controlled by a central authority (like a government) and are instead based on voluntary exchange. A command economy-or centrally planned economy-is a system in which the government controls all facets of the nation’s economy.
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