Command Economic System

A planned economy or directed economy is an economic system in which the state or government manages the economy. Its most extensive form is referred to as a command economy, centrally planned economy, or command and control economy. In such economies, the state or government controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income, much like a communist state. The planners decide what should be produced and direct enterprises to produce those goods.

In a command economic system, the main decision maker is the government. No person may independently decide to open and run any kind of business. The government decides what goods and services are to be produced. And the government sells these goods and services. The government also decides how the talents and skills of its workers are to be used. Supporters of planned economies cast them as a practical measure to ensure the production of necessary goods. Critics of planned economies argue that planners cannot detect consumer preferences, shortages, and surpluses with sufficient accuracy and thereforecannot efficiently co-ordinate production (in a market economy, a free price system is intended to serve this purpose). Planned economies are notoriously corrupt. Their inefficiency leads to the formation of informal social networks.