Command Economy and Market Economy difference

Economy and Finance

Command Economy and Market Economy difference

28 Aug 2023 Zinkpot 144

Command economy is the type of economic system where the government retains, if not all, most of the control of the functioning of the market.
Market economy is one of the financial frameworks where monetary decisions are taken by private sectors or by individual organizations.
The major difference between these two economies is that market economies are generally free from government control, while a command economy is planned at practically every stage by government forces.
In a market economy, production levels and prices for the goods and services are determined by the producers themselves, based on the demand for those goods and services. Conversely, elements like production levels, prices, and even wages in a command economy are determined by the government.
Under market economy individuals can pick their work and utilize their assets and capacity, on the other hand, under a command economy, individuals can’t quit their work or change occupation.
Command economy is concerned with providing basic necessities and opportunities to all the members. Market economies are not concerned with ensuring that less fortunate people have access to essential goods and services or opportunities.
Land and other resources in a market economy are owned by private individuals and firms while under the command economy, they are owned by the government.
The rate of economic growth is higher in a market economy, while it is lower in a command economy.
The rate of economic development is higher in a command economy, while it is lower in a market economy.
Market economies are closely associated with capitalism whereas command economies are closely related to socialism.
Advantages of market economy: The prices under this economy are set by the decision of thousands of consumers and producers each acting in their own self-interest. The profit motive and competition between businesses provide an incentive for producers to deliver the most desirable, cost-effective products at the best possible prices.
Advantages of a command economy: This economy allows a nation to direct its resources towards priority sectors that would not be adequately served by free market forces.
The United States, England, Japan, etc are examples of market economies. East Germany, North Korea, and the former Soviet Union are some illustrations of command economy.