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| In a '''command economy''', the government |
In a '''command economy''', the government controls all levels of its economy. This is typically through high government expenditures on the part of GDP and heavy regulation. This has some advantages determined by ] in that nearly all economic externalities and economic 'Prisoners' Dillemas' can be avoided with a correctly oriented command economy. | ||
| ] advocates such as ] have criticized the '''command economy''' on the grounds that centralized planning ignores the ] and is therefore ineffective. In a similar manner, the idea of a '''command economy''' has been criticized because of inherently large ] associated with costs of distribution. A good example is the ] which suffered many shortages and inefficiencies due to bureaucratic oversight and neglect. This idea may be attributed to ] who predicted the downfall of the ] because of insurmountable ]. | |||
| ==See also== | ==See also== | ||
Revision as of 16:10, 6 December 2005
In a command economy, the government controls all levels of its economy. This is typically through high government expenditures on the part of GDP and heavy regulation. This has some advantages determined by Game Theory in that nearly all economic externalities and economic 'Prisoners' Dillemas' can be avoided with a correctly oriented command economy.
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 bureaucratic oversight and neglect. This idea may be attributed to Ronald Coase who predicted the downfall of the Soviet Union because of insurmountable transaction costs.