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Command Economy

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A command economy, also called planned economy, is directly controlled by the government. The state owns all property and controls all resources including land, labor, and capital in a command economy. Allocations of resources, supply, and price are regulated through central planning. A command economy discourages individualistic profit motives and consumeristic needs. Under such a planned system, rewards, wages, and perks are disbursed based on the social value of the service performed. Certain sectors get preferential allocation at the expense of others, which may lead to shortages in some essential goods. Absence of profit motives precludes any need for competitiveness. This acts as a disincentive in individual contribution to collective efforts. In the 20th century, the former Soviet Union was an example of a command economy. China and India used to also have have a command economy. Today, countries using a command economy are rare. Remaining examples of countries with a command economy include Cuba and North Korea.



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