Which of the following best explains the difference between a market economy and a planned economy

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• This is the first video in the Khan Academy series that annoyed me somehow so far. It is because it pretends to be fairly objective and not-biased but somehow manages to transport some false and unfair images of what both of those markets are. And even if I agree that extreme version of command economy is an utopian one, the narrator of this lesson failed to mention what are the dangers of, his words, "perfect market economy".

  I find it quite problemaric to present "inequality" as a rather small problem and additionally presenting a situation: "I'd rather have a blue car, I will simply work harder". It is such a biased BS I can't even. I hope I won't come across any other moments like this because I grew to like KA videos and, like I had mentioned, this one was the first one to present such an unfair perspective on the topic.
  I think I'm right about this since the comments here contsin mostly a question - why do command economies still exist if they are so bad and this question is raised only because the teacher failed to draw a real situation, a fair balance of pros and cons on both sides.

  • This pretty much sums up my complaints around the teaching of economics as a whole. As a leftist, I'm quite frustrated with the lack of economic knowledge on the left, however its clear to see that it is a result of economics being dominated by the right. Its hard to take a course seriously when the teacher is unwilling to even attempt to properly characterize your positions.

• If things such as inequality, poverty, etc occur in a market economy, why don't all of us shift towards a command economy?

  • We should definitely read Marx's "Capital", which rarely anyone these days have done it, and analyze, how this book was able to influence on humanity. What is this book about, what it tries to explain? Unfortunately, many of us just pass to condemn, rather than reading and making conclusions.

• okay so we're know that command economy aren't really good, so why are they still exist?

  • 
    

    It depends on what you mean by "good", because that depends on the objective of a society.
    Also, "good" is a normative statement. We try as best we can to stick to positive analysis rather than normative analysis in economics. So, a different question that might be asked is, "given the historical experience of many command economies, why do some societies choose command economies rather than market economies?"

    The answer most likely goes back to our very first ideas we learn in economics: tradeoffs. Some decision maker has decided that the benefits to them outweigh the costs of the alternative.

• Is there any kind of profit in a command economy as all of the products and money is equally distributed amongst the people? I think that there would be no growth of the country as a whole.

  • That's why there is no incentive for government workers and people in general. If you're not going to be making more money, or a profit, then 'what's the point of it?'. Profit creates an incentive, lack of profit creates a lack of incentive.

• The video is incoherent: nowhere in the definition of a command economy is stipulated that everyone should be paid the same. Thus, bonuses can exist for innovation in a command economy, so the argument that a market economy provides incentives for innovation whie command economies do not does not follow.

• So, it's my understanding that communism is an anarchist ideology, as in, communists want no government. I could be mistaken, but that's what I remember from "The Communist Manifesto," and "The Conquest For Bread," and what most communists I know and listen to advocate for. So, how could communism be a command economy if it's government run? Or, is he just not explaining command economies very well?

  • Interesting question. The only examples we've had thus far of a communist governments or nations working towards it all involve the utilization of resources being decided by the collective. Whereas primitivism involves extreme self-sufficiency, communism involves extreme group-reliance. This necessitates that private ownership of resources be outlawed but that also certain uses of resources be examined so as to determine whether such a use is beneficial towards the group. But then at this point, if someone were to deviate from the communist practice, then how could such a society be enforced? The point is, government would still exist in a communist society even if the use of resources were to be extremely democratized. I hope I didn't make that sound political, but from what I understand about your question, an anarchist society where the ownership is collectivized is something like an oxymoron. How do enforce a system without a government? Even when sovereignty lies only with the people, an individual who would deviate would have to be held accountable.

• Do you think that the inequality in a market economy is easier to accept when the inequality comes from differences in productivity? Let's think of Steve Jobs. He was very rich but he made great products. On the other end of the spectrum would be, hypothetically, a banker who made bad mistakes but then lobbies the government to bail him out. That hypothetical banker ends up very rich and those who have to pay for it end up poorer. The inequality that results wasn't from the market, it was rent seeking. Isn't that the problem more than inequality itself?

  • This is a fairly personal spectrum, yes the government would bail out the banker but not necessarily make him richer. His mistakes aren't an inequality to the market economy as a whole, yes his products or business might have had quite a small ripple. The government bailing him out is a matter of ethos not as in a selfish thought. This bailing out, I assume in your model of country comes from taxpayer money which is of course dedicated to the economy at best but it has been given to bankrupt people. It brings him back up for a certain price the consecutive time.
    Hope this helped!

• So What is China"s Economy.It seems both not Command Economy and not Market Economy

  • Contemporary China has a capitalist mode of production. Under Mao it was considered Marxist-Leninist but as Melanie pointed out it is more market oriented following the reforms, however i disagree with their last statement. As far as I'm concerned an economy is either dominated by Market logic or economic planning.

• I have two questions

  1. What is the difference between a market economy and capitaism?

  2. What is the difference between a command economy and socialism/communism?

• Surely a command economy could actually provide bigger incentives for innovation than a market economy, if it chose to do so? In a market economy, only a few people will be in a position to effectively capitalize on their ideas, so most ideas will be ignored. In a command economy, the government can reward innovation directly and open this up to everyone, i.e. "only people who submit at least one good idea get access to this luxury good".

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