Command Economy vs. Market Economy There are four main economic systems used in the world today: traditional, command, market, and mixed. In a traditional economy, traditions, customs, and beliefs determine the goods and services produced. Countries that use this type of system are usually dependent on activities such as agriculture, hunting and gathering, and fishing. Parts of the Middle East, Asia, Africa, and South America have traditional economies.

Most economies are either command or mostly market. There really aren’t any pure market economies. Most countries that are considered market economies actually have mixed economies. A mixed economy is a combination of both command and market economies. Command and market economies do share some features, but are still quite different.

The Command Economy
A command economy is one in which the government is in charge. The government decides what goods should be produced. They also decide how much to produce and the selling price. The government sets all laws related to the economy. North Korea, Cuba, and the former Soviet Union are countries with command economies.

Because the government has all of the power in a command economy, there is no competition. Decisions are not often made based on people’s needs and wants. This means that the demands of people are not always met. The government does not need to change the economy when needs and wants change.

A command economy can do certain things more efficiently than other types of economies. Let’s say a country needs to complete a project that requires many resources all at once. These resources could be found more quickly in a command economy.

Another benefit of a command economy is that people do not need to compete with one another. Each person is considered the same under the government.

The Market Economy
In a market economy, the role of the government is very different. People get to decide what goods will be produced and how they will be produced. The government still has the power to set some laws that affect the economy, but those laws should not give people less freedom to make their own decisions. People can choose what job training to get and what career to pursue.

In a market economy, supply and demand help set what products are created. This feature is different from a command economy where supply and demand are not controlling factors. If consumer needs and wants change in a market economy, people can freely change what goods they produce and sell as well.

Market economies encourage competition among businesses. This competition means that some will earn higher profits than others. The most successful ones meet the demands of consumers in an efficient way.

One problem with a market economy is that some individuals use advantages to earn more while not thinking about the needs of others. In a command economy, all individuals under the government are basically supposed to be equal. In a market economy, there are many who are not able to earn on the same level as others. This can lead to more “winners” and “losers” than in other economies.

Some countries including the United States, the United Kingdom, and France are mostly market economies. But they are considered mixed economies because they have both privateowned companies and governments that influence their markets.

The Bottom Line
The government is in charge of a command economy. They make choices for all of the people. The people are in charge of a market economy. The people make most of the choices. Many people think mixed economies have the best characteristics of both types of economies. Increasingly, more countries are using mixed economies.