This is an old revision of this page, as edited by 172 (talk | contribs) at 06:52, 15 November 2005 (de-merged. "command economy" is a typology developed to criticize planned economies. The bulk of the material belongs on the planned economy article.). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.
Revision as of 06:52, 15 November 2005 by 172 (talk | contribs) (de-merged. "command economy" is a typology developed to criticize planned economies. The bulk of the material belongs on the planned economy article.)(diff) ← Previous revision | Latest revision (diff) | Newer revision → (diff)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.