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An economic system known as a command economy is one in which a single, centralized authority manages the means of production and the distribution of resources. In a command economy, the government controls what products are made, how they are made, how much is made, and how it is dispersed among the people. In a command economy, private enterprise and market forces are either nonexistent or barely present.
An essential component of a political structure based on socialism or communism is a command economy. A command economy's primary objectives are to bring about social and economic equality and get rid of the exploitation and inefficiencies of capitalism. According to a set of goals and priorities, such as ensuring that everyone has access to basic necessities, advancing industrialization and modernization, or bolstering national security and defense, the government plans and oversees all economic operations. Additionally, the government controls and runs the majority or all of the businesses, farms, utilities, and services, as well as determining the costs of goods and worker wages.
Comparing a command economy to a free market economy has both benefits and drawbacks. One benefit is that it can efficiently and swiftly deploy resources for major initiatives like infrastructure, education, or healthcare. Due to the fact that everyone has guaranteed work, income, and access to public goods and services, it can also minimize or even eliminate unemployment, poverty, and social disparities. The detrimental externalities of market activity, such as pollution, waste, or excessive consumption, can also be avoided or reduced.
One of the drawbacks is that there is no motivation or reward for individual initiative, risk-taking, or progress, which can inhibit creativity, entrepreneurship, and innovation. As the government is unable to correctly foresee or react to the shifting requirements and preferences of customers, it can also result in poor quality, shortages, or surpluses of goods and services. As government employees and planners may abuse their power, lack knowledge, or make mistakes124, it can also lead to corruption, bureaucracy, and inefficiency. As people must abide by the government's decisions and laws regarding what to create, consume, and do, it can also limit their personal freedom and choice.
