Planned/Command Economies

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What to produce?  In a planned economy, it is the government who decides what to produce.  Governments allocate resources by determining the collective preferences of consumers and producers.  The profitability of these goods is not taken into account.

How to produce?  The government will produce goods through State Owned Enterprises (SOEs).  How these goods are produced is not necessarily done in the most efficient manner, as governments will not replace labour with capital as it will result in high unemployment, even if capital would have been more productive.

For whom to produce?  Goods marked as necessities will be made free or extremely cheap to all citizens, allowing everyone to consume them. The problem of scarcity still…


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