What are the advantages/disadvantages to a command economy?
Advantages – a command economy allows those in charge to direct resources to whatever application they want. Command economies can be quite effective at forcing rapid industrialization, military buildups, heavy industry etc. In some countries like Cuba the government has invested a lot in certain sectors -education,healthcare – at the expense of things that consumers might have preferred (televisions, cars, refrigerators). Command economies can achieve a very high savings rate by forcing savings and squeezing the surplus from labor (related to the ability to industrialize rapidly). Disadvantages – by stifling incentives, command economies tend to experience less innovation, especially in sectors that benefit consumers but are not high priorities for the planners. Labor productivity is lower because people have less incentives to work hard. The lack of correct signals through the market price mechanism leads to an inefficient allocation of resources. Consumer welfare tends to be lower u
