Advantages And Disadvantages of Command Economy

A command economy is an economic system in which the government centrally plans and controls all economic activity. In a command economy, the government owns the means of production and makes all decisions about what to produce, how to produce it, and who gets to consume it.

This type of economy is often associated with communism, as it was the economic system used in communist countries like the Soviet Union.

However, not all command economies are communist as many socialist countries have also used centrally-planned economies.

A command economy is that it can be very efficient.  Because the government is making all economic decisions, it can coordinate production in a way that maximizes efficiency and meets the needs of the people.

The government can also invest in long-term projects that might be too risky for private companies to undertake.

Advantages Of Command Economy

Below are the some advantages of common economy system

1.  No Room For Monopoly

In a command economy there is no space for monopoly. It will be challenging for producers of basic goods to maintain market power if the government selects a central authority to set production requirements and price limits. In the end, this kind of system will be advantageous to customers.

2. Efficient Mobilization Of Resources

A further benefit of the command economy is the ability of the central government to demand increased production of products in times of crisis, such as famine and war. As the government will determine the number of goods affected areas need, people in impacted regions can get the supplies they need more quickly in this way. It will be easier and faster for the public  to obtain these products at a fair price decided by the government.

3. Less Inequality

In a command economy, the government decides who works where and for how much money. This is because it controls the means of production. This power structure stands in stark contrast to a free market economy, where private businesses own the means of production, employ people according to their needs, and pay them wages determined by unobservable market forces.

But In a free-market economy, the law of demand and supply dictates that

Workers who have special skills in high-demand fields receive high wages for their services, while less skilled individuals in fields that are saturated with workers settle for meager wages if they can find work at all.

Disadvantages of Command Economy

Here are some disadvantages of a command economy system.

1.  Discourages Competition And Innovation

As the global market relies on innovation, competition, and the adoption of new technologies, it discourages both of these, which slows down the economy. To this end, meeting consumer demand in both the domestic and international economies is a constant challenge.

2. Full Control Of Government

In the command economy central command authority makes all the decisions and people are forced to follow them. In this process, the system’s capability is frequently ignored and people are compelled to act on them.

3. Black Market

When people’s demands are not met in this economy, markets function through the “shadow economy” or “black market,” where they charge more money for goods and services that the government does not offer. Such markets encourage the flow of money and income that is illegal, which weakens the entire economic and social system.


There is no one-size-fits-all answer to the question of whether or not a command economy is good. It depends on the specific circumstances and context in which it is implemented. Command economies can be successful in some cases and less successful in others.

One key advantage of a command economy is that it allows for centralized decision-making. This can be helpful in cases where there is a need for quick and coordinated action, such as in the aftermath of a natural disaster.

Centralized decision-making can also be advantageous in cases where there is a need for long-term planning, such as for infrastructure projects.

Another advantage of a command economy is that it can help to ensure that essential goods and services are provided to everyone. In a free market economy, there is always the risk that people who are unable to pay will be left without access to essential goods and services. This is not the case in a command economy, where the government ensures that everyone has access to basic needs.

However, there are also some disadvantages to a command economy. One key disadvantage is that it can lead to inefficiency and waste. This is because centrally-planned economies often lack the flexibility to respond quickly to changes in consumer demand. As a result, resources can sometimes be wasted on producing goods that people do not actually want.

Ultimately, whether or not a command economy is good depends on the specific circumstances in which it is implemented.