1. COMMAND ECONOMIES

2. Command Economy Organization
Central government answers the
three economic questions
Government owns factors
of production
Self-interest and competition
(the invisible hand) are absent
No consumer sovereignty
(the desires of consumers
that tell producers what to
produce)

3. SOCIALISM
Belief that democratic means should be used to distribute wealth evenly (requiring high taxes)
Political (democracy) and economic (central planning) equality must coexist
Government owns major industries: utilities, railroads, etc.
Private property and entrepreneurship allowed

4. COMMUNISM Government has all economic AND political power
High degree of central planning (economic equality), but no democracy (political equality)
Communist governments are authoritarian: no individual freedom (no entrepreneurship, private property, bill of rights, etc.)

5. The Former Soviet Union: Agriculture
State-owned farms
and collectives (farms
leased to peasants)
Government made all
production decisions

6. The Former Soviet Union: Industry
State-run factories
focused on military
goods and heavy industry
(chemical, steel, heavy machinery)
Few resources went to consumer goods: scarce and of poor quality
As on farms, jobs and wages
were guaranteed: no incentives
to produce more/better
goods/crops

7. PROBLEMS OF COMMAND ECONOMIES
* Follow directions when writing!
Performance often falls short
of ideals
Consumers’ needs not met
Workers lack incentive
Innovation is not rewarded
Bureaucracy undermines
flexibility
Individual freedoms are
sacrificed (no bill of rights)