Definition
A command economy is an economic system in which central authorities, such as the government, make all decisions regarding production, pricing, and allocation of resources, rather than allowing market forces to determine them.
Why It Matters
Command economies allow governments to direct resources toward national priorities and can ensure the provision of essential goods and services. However, they can also suffer from inefficiencies, shortages, and lack of innovation due to limited competition and price signals.
Example
The former Soviet Union operated under a command economy, where the government controlled production quotas, pricing, and distribution of goods across industries, leaving little role for market forces.