all blog now

September 12, 2023

What is Prohibited in a Command Economy?

In a command economy, the government is in charge of all aspects of production. This can include the allocation of resources, setting prices and rates, and controlling the movement of goods. The government sets prices and prohibits businesses from selling above the set price. This helps to keep prices affordable for the population and reduce inflation. It also limits market manipulation by businesses, which can help with overall economic stability.

This type of economy makes social welfare a key concern and allows the government to direct all industries toward areas that may need more resources or attention. It can also help to promote job creation and reduce unemployment. This can create a sense of community as people work together for the benefit of all, rather than just themselves.

The profit motive is nonexistent in a command economy, which can make it difficult for businesses to innovate and provide new products or services that could improve their bottom line. Manufacturers and service providers work in line with the government blueprint and directives to produce or provide what is needed by individuals, regardless of whether that results in a profit or not.

The lack of competition in a command economy can stifle innovation and limit individual freedom as consumers have limited choices when it comes to purchasing goods or services. Furthermore, without market forces and consumer demand driving the allocation of resources, there is a risk that important societal needs may be overlooked or poorly addressed.