A command economy is one that is controlled by a central authority – usually the government. Its advantages include a high employment rate and a high level of equality. In addition, this type of economy is characterized by the common good replacing profit as a main aim of production.


A command economy can also be named a planned economy. In simple words, this type of economy implies that the government or a central body makes all important decisions. It means that, in the case of a command economy, the government controls the resources, allocates the resources, dictates the use of resources and the allocation of the products created by those resources.

One of the types of governments that used a command economy was communist ones, including the Soviet Union, Cuba, Laos, and Myanmar. Currently, a planned economy is present in North Korea. Some countries that used to have this type of economy, such as China, have shifted to a mixed economy.

There are several advantages of a planned economy. First, under a command economy, there is generally full employment. The reason for it is that the government can use labor force to support its needs; also, there is no business cycle in this type of economy. Second, the government can respond quickly in times of crisis.

Third, in a planned economy, the government controls prices, which means that all citizens can afford services and products. This point also implies that wealth is distributed relatively equally among the country’s population. Such a type of economy may be considered highly beneficial for the citizens.

Moreover, a high level of competition between companies in a command economy results in the elimination of waste.