Anurag Bhullar

A Command Economy or a Planned Economy is one that is completely and directly controlled by centralized federal government. In this type of economy, the coordination of various economic activities is undertaken through administrative methods like directives, commands, targets and regulations. In such economies the price and supply factors are regulated directly by the government rather than the market mechanism. They are the sole decision makers of what goods and services are to be produced and how would they be distributed in the society.

A command economy dejects the individualistic profit motives and consumeristic requirements and needs. Under such an economy, wages, salary, rewards, and perks disbursed are based on the social values of the services performed by an individual. A planned economy is segregated into two different classes centralized as well as decentralized.

However, a command economy is highly stable and encourages investments in the long-term projects. If the economy is carefully planned it proffers surplus production and unemployment rates at reasonable levels. It also guarantees constant exploitation of its available resources to make the maximum possible profit and multiply the wealth of the economy through its gradual process of evolution.

Regardless of all these features and characteristics, the command economy model is rarely used anywhere in the world today. Though some countries like China, India, and former USSR have moved from planned economies to mixed economies, yet there are still some countries like Libya, Saudi Arabia, Burma, North Korea and Cuba that are following command economy in full form.