Sociology Index


Laissez Faire, Market Economy

Command economy is economy directed by state authorities, rather than market forces. There are a variety of command economies. Mesopotamia and Egypt are examples of such command economy. Command economy was found in the ancient world, in agricultural economies, especially those dependent on large scale systems of irrigation requiring extensive regional planning and coordination. Command economy was found in other ancient and medieval societies like Rome, China and among the Inca. A command economy is an economy where economic decisions are planned out by a government authority. Businesses don't freely responding to the laws of supply and demand. Government replaces the forces that operate in free market economics. A command economy needs a political system that is centrally planned.

In modern times, command economy was dominant in the Soviet-style communist societies, where state central planning agencies allocated capital and resources, established production targets and fixed the levels of prices. Command economy, because they rely on centralized bureaucratic administration, appear to be inherently less efficient than market mechanisms in allocating resources and stimulating economic growth. A command economy is an economy where supply and price are regulated by the government, not market forces. Government decides which goods and services are produced and in what manner they are distributed. Soviet Union is an example of a real and successful command economy. The concept of a command economy was developed by Viennese economist Otto Neurath. The phrase command economy comes from the German "Befehlswirtschaft" and was initially used to describe the Nazi economy.

Characteristics of a Command Economy

Centrally planned command economy can be identified by the following characteristics:

1. In a command economy the government creates a central economic plan for all sectors and regions of the country.

2. In a command economy the government allocates all resources according to the central plan.

3. In a command economy the central plan sets the priorities for production of all goods and services.

4. In a command economy the government owns a monopoly business in industries deemed important to the goals of the economy.

5. In a command economy the government creates the laws that regulate economic activity.

Advantages of Command Economy

Command economies are great at mobilizing economic resources quickly, effectively and on a large scale.

Command economies are also good at wholly transforming societies to conform to a vision.

The command economy in Russia built up an effective military might and quickly rebuilt the economy after World War II.

Disadvantages of Command Economy

This rapid mobilization means command economies ignore other societal needs. Command economy develops a shadow economy, or black market, to buy and sell the things the command economy isn't producing.

Command economies produce too much of one thing. Rationing often becomes necessary.

Command economies don't stimulate innovation.

Command economies have trouble producing the right exports at global market prices.

Command Economy Examples

North Korea, China and Russia are the examples of command economies. Russia's Gosplan was the longest running.

The new global command economy - Mohameden Ould-Mey
Environment and Planning D: Society and Space 17(2) 155 – 180
Abstract. Although the process of globalization has brought about more liberalization and decentralization of political economies at the national level, it has also created a far more regimented and centralized economy and polity at the international level. This shift of the center of gravity of political economy from the national to the international level is what the phrase the new global command economy attempts to grasp. I analyze how the new global command economy continues to perpetuate the core-periphery divide through what the G7 economic summit has labeled a new global partnership between developing countries, developed countries, and multilateral institutions.

Profiting from Government Stakes in a Command Economy: Evidence from Chinese Asset Sales - Charles Calomiris, Raymond Fisman, Yongxiang Wang,
Abstract: The market response to an unexpected announcement of proposed sales of government-owned shares in China. In contrast to the "privatization premium" found in earlier work, we find a negative effect of government ownership on returns at the announcement date and a symmetric positive effect in response to the announced cancellation of the government sell-off.

The Stalinist Command Economy - PAUL R. GREGORY
The ANNALS of the American Academy of Political and Social Science, Vol. 507, No. 1, (1990)
This article outlines the key features of the traditional administrative command economy model used by the centrally planned socialist economies to allocate resources. The administrative command economy model permits the party leadership to set priorities and monitor their fulfillment through the state economic bureaucracy and local party apparatus.

Command Economy - Richard E. Ericson
From The New Palgrave Dictionary of Economics, Second Edition, 2008
Edited by Steven N. Durlauf and Lawrence E. Blume
Abstract: The concept of a ‘command economy’, a construct in the theory of comparative economic systems, is defined, and its origins, characteristics, and consequences for any society in which it is implemented are explored. Although initially appearing to be a true alternative to the market economy, a command economy, most nearly realized in the Soviet Union (1930–87), proved to be ultimately non-viable, collapsing under reforms attempting to make it competitive with market systems.

Plan, siphoning and corruption in the Soviet command economy
Harrison, Mark, and Kim, Byung-Yeon
Working Paper. University of Warwick, Department of Economics, Coventry.
Abstract: This paper reconsiders Andrei Shleifer and Robert Vishny’s suggestion that a socialist industry will always prefer to cut both price and output relative to a market-clearing equilibrium in order to maximise bribe income. The empirical evidence from recent archival studies of the Soviet economy does not support this conjecture.

Migration of railway freight transport from command economy to market economy: the case of China - Xie R.; Chen H.; Nash C.
Transport Reviews, Volume 22, Number 2, 1 April 2002 , pp. 159-177(19)
Abstract: In recent years, Chinese railway freight transport has been facing great challenges from transport market reformation and economic expansion. Although the total volume of railway freight has been increasing, its market share has decreased greatly, especially at the beginning of migration from command economy to market economy. It is concluded that Chinese Railways has not yet adapted sufficiently to new economic conditions, although in recent years progress has been made. Further reform will be needed.

Dynamic instability of a command economy
Miyamoto Katsuhiro, School of Economics, University of Osaka Prefecture
Bulletin of University of Osaka Prefecture. Ser. D, Economics, business administration and law 38 pp.1-13
Abstract: In 1991, the former Soviet Union collapsed. It was mainly because of an inefficiency of the command economy of socialism. The command economy brought about a downfall of productivity in all industries. The government of Russia and other counties of the former Soviet Union are planning to shift from the centralized command economic system to the market economic system. We will theoretically analyze that the centralized command economic system has its own instability of socialism.

A State under Siege: Military Origins of Command Economies - Osinsky, Pavel
Abstract: The purpose of my paper is to explain the phenomenon of modern command economies. A command economy refers to direct state control over production, distribution and consumption of resources. It involves not a market regulation but an administrative regulation as a dominant form of economic organization. Scholars argue that command economies were first instituted among the major belligerent powers in Europe during World War One (Porter 1994, Scott 1998). I accept this argument as a central premise of my study. My war-centered explanation of command economies is consistent with the Kornai’s (1980) description of state socialist economies as “resource-constrained systems,” or economies of shortage.

TRANSITION FROM A COMMAND ECONOMY: RATIONAL EXPECTATIONS AND COLD TURKEY. MURRAY WOLFSON. Journal article by Murray Wolfson; Contemporary Policy Issues, Vol. 10, 1992
Although the transition from a command economy to a market economy is perilous, the author advises policymakers that retarding the tempo of change will invite economic and political disaster.
Nations of the former communist world face an urgent question: How do they make the transition from the command economy of direct planning, to the "market economy"? While policymakers understand command economy only too well, they envision "market economy" only imperfectly.

Seasonal anthropometric cycles in a command economy: The case of Czechoslovakia, 1946–1966 - Tomas Cvrcek, Department of Economics, Vanderbilt University
Economics & Human Biology, Volume 4, Issue 3, December 2006, Pages 317-341
Abstract: Anthropometric evidence is used to shed light on the living standards in early communist Czechoslovakia (1946–1966). Height and weight variation of adolescent boys exhibit a pattern that is inconsistent with that for a normal healthy population. This pattern arose from periodic food supply shortages, most marked in the spring of each year. The boys in the sample display a remarkably slow growth during the spring but catch up over the summer.

Managing human resources in a post-command economy: personnel administration or strategic HRM - Thomas Garavan, Michael Morley, Noreen Heraty, Jacinta Lucewicz, Adam Suchodolski
Personnel Review 1998, Volume: 27 Issue: 3 Page: 200 - 212 ISSN: 0048-3486
Abstract: Reviews the changes in personnel/HRM practices within a post-command economy. Explores personnel/HRM practices within 25 Polish companies and reports on the diversity of personnel/HRM practices in evidence.

Priority, Duality, and Penetration in the Soviet Command Economy, Ericson, Richard E.
Abstract : This Note analyzes characteristics of the Soviet economy that are underemphasized in existing macroeconomic models of the Soviet Union. The analysis is carried out in a series of simple two-sector macromodels of plan implementation in a priority-driven command economy.

Coercion, compliance, and the collapse of the Soviet command economy.
Harrison, Mark
Economic History Review, Vol.55 (No.3). pp. 397-433. ISSN 0013-0117
Abstract: Are command systems that rest on coercion inherently unstable, and did the Soviet economy collapse for this reason? Until it collapsed, the Soviet economy did not appear unstable. Why, then, did it collapse?

From Command Economy to Hollow State? Decentralisation in Vietnam and China
Painter, Martin, City University of Hong Kong
Australian Journal of Public Administration, Volume 67, Number 1, March 2008 , pp. 79-88(10)
Abstract: In Vietnam and China, decentralisation is a by-product, both by default and design, of the transition to a state-managed market economy. A dual process of horizontal and vertical decentralisation is occurring simultaneously in both the economic and political arena.

The command economy cometh - Donald C. Wellington
International Journal of Social Economics, Year: Volume: 27, Issue: 4, Page: 259 - 271.
Abstract: The paper is a philosophical discourse on capitalism and its intellectual rationalization, economic theory. Both blithely ignore the most fundamental character of the human condition.

Increasing the Validity of Post Command Economy Research and Application
by Rene Dentiste Mueller and James D Mueller
Journal of East-West Business, ISSN: 1066-9868 Volume 3 Number 1 1996 page 7-26
Abstract: The demise of communism in the post command economies (PCEs) has created considerable interest from both academics and practitioners. Post command economies researchers have failed to consider fundamental issues related to cross-cultural/cross-national research design. This paper highlights a number of problems researchers face when investigating Post Command Economy regional phenomena.