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What is a Command Economy?

Malcolm Tatum
Updated May 16, 2024
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The command economy is an economic system that is controlled by a centralized federal government. In most examples of this type of economy, the focus of the control is on the industrial goods that are manufactured with the country. Sometimes referred to as a centrally planned economy, it is not unusual for the government to own and operate the production facilities producing the goods, or to maintain a high level of control over companies that are allowed to operate within the country.

In theory, the concept of a command economy is to ensure that the populace of the country has a sufficient supply of industrial products that are available at prices that will be reasonable for the manufacturer as well as good for the overall economy. Often, the price of the good produced is also regulated by the government. This action is understood to maintain balance in the economy, ensure jobs within the industrial production sector of the job market, and also help to maintain the quality standards set by the government.

Another benefit that supporters of a command economy often cite is the efficient use of resources. By carefully controlling the rate of production, it is possible for the central government to eliminate a supply that exceeds the current demand within the country. As a result, inventories of finished goods are smaller. This in turn reduces the number of products that remain on the shelf and eventually become obsolete and have to be destroyed or sold at a loss.

A command economy does not place control of the entire consumer market in the hands of the government. In general, a country that employs this type of economical concept will not be any more involved with such markets as agriculture than a country operating with a free enterprise system. This means that not every type of consumer product produced within the country will be owned or heavily regulated by the central government.

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Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
By anon268877 — On May 15, 2012

Why are people so biased about economies? If they don't like the once that they live in now, then why can't the just move to another country with an economy that suits them? Why do they try to shape their current country to fit their needs without considering others?

By anon167328 — On Apr 12, 2011

the US is a mixed economy. we have a market economy but the government regulates it. that's why obama bailed everyone out. because he regulates it.

By anon150366 — On Feb 07, 2011

CIA? Yea, trust the CIA, a government agency that props up corrupt governments around the world, and the so called "facts" that describe domestic affairs in America.

The United States is socialist oriented with free-market tendencies. -Common Sense

By anon143807 — On Jan 17, 2011

@anon 52248 Really? Last time i checked, the US is officially a "market oriented economy". Check the CIA worldfactbook if you think I'm wrong

By anon140809 — On Jan 08, 2011

This type of economy is not that bad, but i am quite thrilled that my Canada does not use this type of economy. North Korea enlists this type of economy and now they are suffering from starvation, energy shortages and a poor quality of life.

By anon127601 — On Nov 16, 2010

i am so happy the u.s doesn't use this style of economy but i don't understand why other countries do.

By anon52248 — On Nov 12, 2009

The US uses this style. We're induced to buy high fructose corn syrup, car insurance, fda-sanctioned pharmaceuticals, and maybe even health care.

By anon26657 — On Feb 17, 2009

command economy is not the way to go and currently cuba uses this style of economy

Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
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