This is an old revision of this page, as edited by 10lbs of potatoes (talk | contribs) at 18:49, 20 December 2005 (rv until we can get a more coherent and inclusive definition). The present address (URL) is a permanent link to this revision, which may differ significantly from the current revision.
Revision as of 18:49, 20 December 2005 by 10lbs of potatoes (talk | contribs) (rv until we can get a more coherent and inclusive definition)(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 the distribution of goods. 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.