Disadvantages of The Two Extreme Economies: Free Market and Command Economy

Command Economy

In a Command Economy it is practically impossible for the governments to assess demand for each one of the host of goods and services that people want. So governments make themselves responsible for deciding what people need and what will be best suited for them. This means that consumers lose most of their freedom to choose.

 In addition, this kind of system requires a rather cumbersome administrative system – hence bureaucracy, slow decisions and stagnation. Plus, salaried officials tend to be less innovative and more conservative as they lack incentive provided by the profit motive. Salaried officials in a Command Economy will lead to corruption in some form or another. The fact that these officials plan and organise every aspect of they economy means they are a great target to bribe, easy to bribe and are often exposed to bribery. They may also change or create plans that are beneficial to their own status or to that of their bribers.  

There also occurs a problem of surplus in this kind of economy. It is common in a command economy for there to be a waste of labour or materials, due to bad allocation by officials. A further disadvantage is the lack of technological advancement. In a Command Economy the government will only put its resources into areas which will benefit it directly, like the military. However, in a Free Market, inventors are free to do what they like, and can profit hugely if they invent something needed.