| Revision as of 06:52, 15 November 2005 edit172 (talk | contribs)24,875 edits de-merged. "command economy" is a typology developed to criticize planned economies. The bulk of the material belongs on the planned economy article.← Previous edit | Revision as of 08:55, 18 November 2005 edit undo212.85.24.83 (talk)No edit summaryNext edit → | ||
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Revision as of 08:55, 18 November 2005
In a command economy, the government determines production levels and sets prices. This is said to be advantageous because it prevents unscrupulous investors from taking advantage of consumers. Free market advocates such as Milton Friedman have criticized the command economy on the grounds that centralized planning ignores the price signal and is therefore ineffective. In a similar manner, the idea of a command economy has been criticized because of inherently large transaction costs associated with costs of distribution. A good example is the Soviet Union which suffered many shortages and inefficiencies due to beaurocratic oversight and neglect. This idea may be attributed to Ronald Coase who predicted the downfall of the Soviet Union because of insurmountable transaction costs.