What is Command Economy?

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‘Command economy’ is a type of economic system where all economic activities are controlled by a central planning authority. Such an economic system has a ‘central planning authority’. All kinds of economic activities are conducted in the society by the order or direction of this authority. In a Command economy there is no private ownership of resources. The ownership of all the means of production of the country is vested in the hands of the state. On behalf of the state, the central planning authority controls all economic activities including production, consumption and distribution of goods. There is no personal ownership or authority over the resources of the country. Production, distribution or consumption are not conducted according to the will of any individual. The state is the owner of all the means of production. In such an economy, every person works according to his ability or qualification and gets paid according to his work. Instructional economy is also called ‘socialist economy’ or ‘planned economy’. In short, an economy in which there is no private ownership of wealth, all the resources of the country are owned by the state and all economic activities are carried out under the direction of a central planning authority, which is called 'command economy'.

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Characteristics of Command Economy

Socialist economy has some basic features. These features are:
State ownership: The main feature of a command economy is the stop of private ownership of resources. There is no private ownership over factories, land and other materials of production. Social or state ownership is established over all the resources and means of production of the country. The people of the country or the state are the owners of all resources.

Absence of personal profit: One of the features of Command economy is the cessation of personal profit. Private ownership of assets creates opportunities for personal gain. But in a Command economy there is no scope for personal profit as there is no private ownership of property.

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Social welfare: In a Command economy, the production and distribution system of the country is run with the aim of social welfare. In a capitalist economy, the main goal of the producer is to make personal profit. But the main goal of production is to achieve maximum social welfare in the Command economic system.

Economic planning: One of the main features of a Command economy is economic planning. The Command economy system has a Central Planning Authority. How much of a product will be produced, when it will be produced, how it will be produced and how it will be distributed, etc. are all decided by the Central Planning Authority. The Command economy is also called the planned economy.

Method of production: In Command economy or socialist economy, production system plays an important role in solving economic problems. In command economy there is no private ownership over the means of production. Maintains social ownership or state ownership over all materials of production. In a capitalist economy the production activities are conducted for the purpose of profit as private ownership over the means of production is maintained. But in a Command economy all production activities are directly controlled by the government or the state. In a Command economy, production is carried out with a view to social needs.

Distribution system: One of the features of Command economy or socialist economy is balanced distribution system. The basic principle of distribution in Command economy is that "everyone will work according to his ability and will be paid according to his work. Command economy ensures equitable distribution of income and wealth of the society and social justice is established.

Social security: In a Command economy, social security of all people is ensured. All the basic necessities of people in a Command economy; Namely: food, clothing, shelter, education and medical care are provided.