what is prohibited in a command economy select two answers

Breiz Heurope

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10-03-2025

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What's Forbidden in a Command Economy? (And Why)

Command economies, where the government controls the means of production and distribution, have strict limitations on individual economic freedom. While the specific prohibitions can vary based on the specifics of the governing regime, two key restrictions consistently appear:

1. Private Ownership of the Means of Production: This is arguably the most fundamental prohibition. In a command economy, the government owns and controls all major resources—land, factories, natural resources, and capital equipment. Private individuals are generally forbidden from owning or operating businesses independently. Any attempt to establish a private enterprise, outside the strict control of the state, is considered illegal. This directly contrasts with market economies, where private ownership is a cornerstone.

2. Free Market Pricing and Competition: The government sets prices for goods and services, eliminating the forces of supply and demand that characterize free markets. Competition, as we understand it in capitalist systems, is absent. Businesses don't compete for customers based on price or quality; instead, they operate according to government-mandated production quotas and pricing structures. This often leads to shortages, surpluses, and inefficient allocation of resources. Consumers lack the choice that a free market provides. Attempts to circumvent these price controls or engage in competitive practices are illegal activities.

Understanding the "Why" Behind the Prohibitions:

These prohibitions are not arbitrary. They stem from the central tenets of a command economy:

• Centralized Control: The government aims to have complete control over the economy to direct resources towards its chosen priorities. Private ownership and free markets are seen as obstacles to this goal, leading to unpredictable outcomes.
• Elimination of Profit Motive: Profit is viewed with suspicion. In a command economy, the focus is on fulfilling state-defined needs, not maximizing profits. Private enterprise and the pursuit of profit are therefore deemed disruptive to this planned economy.
• Social Equality (in Theory): Proponents argue command economies can lead to greater social equality by preventing wealth concentration. However, in practice, this goal is rarely achieved. Instead, power tends to become concentrated within the government and ruling elite.

Consequences of These Prohibitions:

The prohibitions on private ownership and free markets lead to several negative consequences, often observed in historical and contemporary command economies:

• Shortages and Surpluses: Inefficient allocation of resources leads to shortages of desired goods and surpluses of unwanted goods.
• Lack of Innovation: Without the incentive of profit and competition, there is little motivation for innovation and improvement.
• Lower Quality Goods and Services: The absence of competition leads to lower quality goods and services, as there's no pressure to meet consumer demands.
• Economic Stagnation: The economy often struggles to grow efficiently, leading to lower standards of living for citizens.

In conclusion, the prohibition of private ownership of the means of production and free market pricing are central to the workings of a command economy. These restrictions, intended to establish centralized control, often result in significant economic inefficiencies and limitations on individual freedoms.