1. Warm-up
Imagine you are a worker in a communist country. The government tells you where you will work, how much to produce and when to do it.
How likely are you to be innovative or efficient?
Why?
What do you think the quality of your work would be? Why?

2. Econ. Ch. 2 Sect. 3 Command Economy Goals:
1. Describe how a Command Economy is organized.
2. Explain the difference between Socialism and
Communism.
3. Identify the advantages and disadvantages of a Command Economy.

3. Command Economy
Also called Centrally Planned Economy –System where the government is the decision maker in the economy. The gov’t decides what, when and how much to produce. The gov’t owns all the land and large capital and then distributes them to the firms, decides who gets the G & S and at what price they will be sold. The gov’t controls labor, assigns workers to their jobs and sets the wages they will be paid.

4. Example of Command Economy
Uniforms vs. Sweaters
Gov’t decides that they want new uniforms.
Cotton, buttons, workers etc. are divided up according to decision, more goes towards uniforms
More uniforms = less sweaters
What happens if the winter is cold and people need more sweaters?

5. Socialism vs. Communism
Socialism- social and political philosophy that wealth should be distributed equally across society.
Socialist countries could be Democracies
Political Equality + Economic Equality = Real Equality
Communism – political system that has an authoritarian gov’t (dictator) that has all the economic and political power. The gov’t requires strict obedience and allows little personal freedom. Communists believe that revolutions are necessary to eliminate previous gov’t in order to change society.

6. Soviet Union The Soviet Union was a Command Economy
It controlled all the factors of production and had collective farms where peasants were assigned the crops they would grow.
Jobs were assigned to workers regardless of their preferences and wages were set by the gov’t. It was illegal for someone to start their own business.
The worker’s wages were low, but prices set by the gov’t were usually low as well. Though prices were low, consumer goods were scarce and usually poor quality.
Housing was poor quality and often crowded because there was no incentive to build more or maintain.

7. Advantages and Disadvantages
Can jumpstart selected industries when country is new or struggling
Guarantees jobs, wages and housing to citizens
High Economic Equity – Distribution of G & S is equal across the board
Disadvantages-
Poor quality of goods, shortages and low innovation
Individual Freedoms are sacrificed for gov’t goals

8. Goal Check Describe how a Command Economy is organized.
Explain the difference between Socialism and Communism.
Identify the advantages and disadvantages of a Command Economy.