Command Economy

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Definition of 'Command Economy'

A command economy is an economic system in which the government controls the allocation of resources, production, and distribution of goods and services. The government sets prices, wages, and production quotas. In a command economy, the government owns all or most of the means of production, such as factories, farms, and mines.

There are several advantages to a command economy. First, it can be more efficient than a market economy in allocating resources. The government can use its central planning to identify and address bottlenecks in production, and it can ensure that essential goods and services are produced. Second, a command economy can reduce inequality. The government can set wages and prices, and it can redistribute income through taxes and social programs. Third, a command economy can promote economic growth. The government can invest in infrastructure and education, and it can direct resources to industries with high potential for growth.

However, there are also several disadvantages to a command economy. First, it can be less efficient than a market economy. The government may not have the information or expertise to make the best decisions about resource allocation. Second, a command economy can stifle innovation. The government may be slow to adopt new technologies or to respond to changing market conditions. Third, a command economy can be more susceptible to corruption. The government officials who control the economy may use their power for personal gain.

Overall, a command economy can be a more efficient and equitable way to organize an economy. However, it is also more susceptible to corruption and inefficiency.

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