Command vs. Mixed Economy: An Overview

Command and mixed economies are two different economic systems. The command economy is at one extreme of the economic spectrum while a free market economy is at the other. A mix🍸ed economy falls in between the two.

A command economy is controlled by the government. A mixed economy is run partly by the government but mostly as a free market economy (an economy with little government int💞ervention and predominantly driven by th🌌e private sector).

In a command economy, economic activities are planned and ordered by the government, which controls all production mechanisms. In a mixed economy, privately-owned businesses, consumers, and the forces of 澳洲幸运5官方开奖结果体彩网:supply and demand determine economic activity, w🃏hile the government takes action at times t♓o stimulate or slow growth.

Command Economy

Sometimes called a planned economy, a 澳洲幸运5官方开奖结果体彩网:command economy is an economic system where the government maintains controlꦍ over the production and pricing of goods and services.

The governm💞ent decides which goods and services to produce, the production and distribution method⭕s, and the prices of goods and services. The government is the central planner and decision-maker.

Disadvantages

Because the government sets and controls all aspects of business in a command economy, there is 澳洲幸运5官方开奖结果体彩网:no competition. Monopolies, which are owned by the government, are common. These monopolies may include financial services, utilities, and even companies within the transpo𝔍rtation sector.

Command economies often make too much of one product and not enough of another because it is difficult for one entity (i.e., the government) to realize the needs of everyone in the country. So, a command economy often means large 澳洲幸运5官方开奖结果体彩网:surpluses or 澳洲幸运5官方开奖结果体彩网:shortages of products and services.

Risk of Black Markets

A shadow economy or 澳洲幸运5官方开奖结果体彩网:black market may develop to fulfill the needs not met by the government. The shadow economy violates a country's rules and regulations because the economic activities take place illegally and participants avoid taxes. A shadow economy arises when governm𝄹ents make transactions illegal or a good or service unaffordable. People in the economy search for ways to get around government restrictions.

Examples of command economies today include North Korea, Iran, Libyaꦡ, and Cuba. China was a command economy before turning to a mixed economy with both communist and capitalist ideals.

Mixed Economy

A mixed economic system has features of both a command economy and a free-market system. It is controlled to some degree by the government but growth is driven by the forces of supply and demand and the involvement of the public and 澳洲幸运5官方开奖结果体彩网:private sectors.

Governments in most mixed economies use 澳洲幸运5官方开奖结果体彩网:fiscal or monetary policies to stimulate growth during economic slowdowns. This may come in the form of corporate bꦇailouts, changes in interest rates, or stimulusඣ packages.

Generally, government regulation in a mixed economy is limited, compared to the heavy government regulation and control in a command economy. Corporations are allowed to profit, but levels of profit might be affected by taxation or tariffs.

Mixed Economy in Action

Suppose the ABC Company, a ꦆtoy manufacturer, exists in a mixed economic system. The prices and production levels and manufacturing methods are controlled by ABC but can be affected by consumer behavior (demand) and producer supply.

It turns out that ABC has been using too many of the natural resources in th🌄e state where it is located. The government decides to intervene by imposing certain restrictions because excessiv💎e use of vital resources goes against the public good.

Unlike the case of the command economy, a mixed economy may not have large surpluses or shortages. That's because production is driven largely by a producer's supply of a product and demand for it by consumers, so the manufacturing and distribution of goods and services rolls out as needed.

Prices also are dictated by supply and demand rat♕her than by the government. The right of a company or indivi🙈duals to profit and the freedom to develop innovations and bring them to market are also key elements of the mixed economic system.

Most of the main economies in the world are now m🐠ixed economies, which operate under a combination of socialism and c🐼apitalism.

Examples

North Korea's Command Economy

North Korea ranks as the least economically free country in the Heritage Foundation's 2023 Index of Economic Freedom. All of its economic activity is completely controlled by its governing political party. The country exists on the edge of bankruptcy.

Per the definition of a command economy, North Korea plans, establishes, and controls production levels for the majority of products and services. Industries owned by the state are responsible for almost all of the nation's 澳洲幸运5官方开奖结果体彩网:gross national product.

Entrepreneurial activity is practically nonexistent. A majority of the country's population lives in poverty. And it is unlawful to leave the country (or travel domestically) without the government's permission.

The United Kingdom's Mixed Economy

A leading global economy, the United Kingdom ranks as the 28th most economically-free nation in the aforementioned 2023 Index of Economic Freedom. As in a mixed economy, its economic activity is driven primarily by private enterprise, with some government involv🎃ement in areas of healthcare and social welfare.

The service sector, and most notably banking, insurance, and business services, are major areas for the nation's GDP growth. At the same time, the country is trying to rein in government spending and public debt to improve the quality of its public finances.

With its firm belief in free markets, the UK has signed three new trade agreements since its departure from the European Union and continues to pursue additional treaties.

The Bottom Line

The command and mixed economies are two types of global economies. A command economy is one in which the government plans and contr💟ols all economic activity, including the setting of prices.

A mixed economy has some government involvement, e.g., through the implementation of fiscal and monetary policies to stimulate or cool down growth. But the primary drivers of economic activity are private enterprise 🐟and the actions of consumers.