The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Command Economy

  • Richard E. Ericson
Reference work entry


The concept of a ‘command economy’, a construct in the theory of comparative economic systems, is defined, and its origins, characteristics, and consequences for any society in which it is implemented are explored. The impossibility of the absolute centralization which it requires generates compromises with the market forces it aspires to replace, fostering a symbiotic marketized ‘second economy’ which systematically undermines its foundations. Hence, although initially appearing to be a true alternative to the market economy, a command economy, most nearly realized in the Soviet Union (1930–87), proved to be ultimately non-viable, collapsing under reforms attempting to make it competitive with market systems.


Active vs passive money Aggregation Balance Bounded rationality Bureaucracy Central planning Centralization Command economy Command mechanism Command principle Communism Complex social economy Corruption Decentralization Discretion Gorbachev, M. S. Gross output Inca production system Incentive provision Industrialization Inequality of income Information khozraschet Labour discipline Market mechanism Market versus plan Micro-balance Moneyness Mormon economic system Neurath, O. perestroika Price control Principal and agent Rationing Resource allocation Second economy Sellers’ market Shadow economy Soft-budget constraint Soviet economic reform Soviet Union Stalin, J.V. Suboptimization Unit of measure Vested interests War and economics War communism 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Richard E. Ericson
    • 1
  1. 1.