Command economy

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A command economy is an economic system in which a centralized authority, usually a government, has the power and responsibility to make all economic decisions.

The most indisputable examples of command economies are those countries where the government owns all businesses and enterprises (these are usually communist countries). One of the best examples of a command economy is in North Korea, where the government owns nearly all important factories and industries. However, there have also been a number of countries where business remained private but business owners were in some way or other subservient to the government (for example, some fascist countries, and some democratic countries as well, particularly in times of war); it is not clear whether these can also be called command economies.

Command economies can be less wasteful in some respects (and from the point of view of those in command) than the free market but also tend to encourage conformity and standardization instead of experimentation and creativity. Often, in a command economy, economic stability becomes more important than innovation. For instance, many command economies eliminated unemployment and gave everyone a job, but encouraged people not to seek to improve their condition. As a result, a great number of the world's command economies were dismantled in the early 1990s due to changes in the availability of natural resources and in demand. Many command economies have also been subject to resource shortages when government set quotas for goods production fall short of the actual demand, or demand rises unexpectedly . Command economies also encourage workers to sacrifice their well being for the good of the state, resulting in lower standards of living then demand-driven economies.