Command vs Market Economy

Command Economic System: When we talk about the term “command” in historical context; whether it relates to economic, political or warfare, command has always been vested in the hands of the few. If we relate “these few” to a group of people who exercise power in terms of making decisions (be it economic/social/political etc) for ALL the people they govern, we call this process or system a “Government”. In a command economic system, this government basically owns and controls most of the economic resources of the country.
This “Command” economic system is also known as “socialism” or “communism” (McConnell – Economics) In any economic system decisions have to be made regarding production of goods and services, price setting, education, expenditure on infrastructure, resource allocation, resource/property ownership, resource distribution, establishment of industries and businesses, salaries for individuals etc. In a Command Economic System, all these decisions are taken by the Centre/Government.
Public in general/ individuals in general do not have any “say” in such government decisions. Practically speaking, “Absolute” command economy doesn’t exist in this world, even near perfect “command economy” of Soviet Union/Russia had private/market influences in its system. McConnell states North Korea and Cuba as near to perfect Command Economic Systems. Pakistan too took a step towards socialism/nationalization in Zulfiqar Ali Bhutto’s era in 1970s, which later had to be discontinued in wake of emerging capitalist economic forces at that time.

Market Economic System As opposed to Command Economic System, Market Economic System is characterized by near to minimal role of Government in governing and directing economic activity of the country. In other words, it is simply the opposite of a command economic system discussed above. The salient features of a market economic system includes “Private” ownership of economic resources (i. e. , land, labor, capital and entrepreneur), coordination of economic activity through markets, production and distribution decisions aken by private businesses and firms, determination of market prices and quantity through forces of demand and supply (rather than government) etc. The concept of market is fundamental in understanding the captioned subject. Market is a place where buyers and sellers of products come together and through their buying and selling behaviour, price and output for the economy is determined. The sellers seek to maximise their objectives (primarily profit) through engaging in practices that may compromise societal benefits at large (self interest).
To keep profitable, businesses innovate/invest in R&D to achieve economies of scale to minimise cost and this lust for market power often leads to competition/inter rivalry amongst firms which leads to production of goods and services at less than socially optimum level. Though practically speaking a perfect market economy can’t exist (government intervention is required in certain areas) Hong Kong, United States and Ireland (ref McConnell) are nearest examples of free market economies in today’s world, where Government’s intervention is minimal.