Outline the positive and negative features of the command economy.

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06.12.03

Outline the positive and negative features of the command economy

The essential economic problem is limited resources, such as land, labour, capital and enterprise, in relation to unlimited wants. Because of this, people need to answer the three basic economic questions: what to produce, how to produce and for whom to produce. Therefore there is a need for effective resource allocation with effective answers or rather methods of organizing the production, distribution, exchange, sharing goods and services. Allocation of scarce resources is organized through several different economic systems.

The idea of the command economy is to answer the three basic economic questions completely by the government (not by the market forces) and that means also that all factors of production are owned by the government. It is based upon the Karl Marx’s (1818-1883) theory that all people are equally. This way of answering the questions is not perfect and hence contain both advantages and disadvantages.

Positive features

The Government is very powerful (so overall there is the possibility to grow economically very quickly from a poor background) and plans everything for the society. These social goals are also individual goals, thus the state cares for every person equally:

It distributes and redistributes the wealth equally, so that everyone has the same income.

Current spending, such as in social welfare, government employees, defense, health, pensions, debt repayments, is made by the government and therefore the society receive all these goods and services for free.

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Capital spending, such as in the infrastructure, e.g.: airports, housing, roads and rails, education, telecommunication, is made by the government and therefore the society receive all these for free as well.

Moreover there is enough provision of essential services, law and order, cultural affairs, international relations and social issues.

Factors of production are not just mobile because of governments help or plans, they are also used effectively, that means that unemployment and inflation do not exist.

This is because the prices are constant, they are controlled by the government, not by constantly changing/insecure market forces:

The government shifts the ...

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