What Are the Differences Between a Command Economy and a Market Economy?
A Lesson in Economics
What is a command economy?
A command economy is based on what the ruler or ruling class wants. One example is the Ancient Egyptians. The Pharaohs wanted to build huge pyramids and so they provided the material to build them, and the land to build them on, and the people provided the labor. The Pharaohs commanded the people to build the pyramids. Communism is a type of command economy. In a communist society the government, or the person in charge, decides what kind of goods will be produced and how much will be charged for them. It sets the wages for the workers and tells the employers how much they have to pay their employees. Supply and demand do not have a part in a command economy. Since the government makes all of the decisions there are no price wars or competition to drive prices down or demand up.
What is a market economy?
A market economy on the other hand brings together the buyers and the sellers to make the decisions regarding what will be made, how it will be made and how much it will be sold for. The New York Stock Exchange is a prime example of a market which brings buyers and sellers together. The laws of supply and demand play a huge part in a market economy. If the people want it or need it, and the demand goes up, the price will also go up because if the price does not go up the suppliers may not be able to keep up with the demand. If nobody wants or really needs an item, then the price will come down to try to sell more of them. The market economy is by far the better type. It is based on private enterprise. I can earn as much money as I want based on how valuable my item or service is to society.
A command economy is interested in providing a service to everyone equally. The government wants to make sure everyone has the basic necessities, but they also control what their citizens can and cannot have. In a market economy it is true that because of high prices some people will go without basic needs, such as food, shelter or healthcare, but I still think a market economy is far better. I don’t want the government telling me what I can or cannot buy, or how much money I can get paid at my job. Do you?
