Traditional Economy and Command Economy The Difference Between Them

An economy is a system that deals with the production, distribution, and consumption of goods and services. There are various types of economies around the world, including traditional, command, market, mixed, and others. In this article, we will discuss the differences between traditional economy and command economy.

Traditional Economy Definition

A traditional economy is an economic system in which goods and services are produced, distributed, and consumed based on customs, traditions, and beliefs. This system is prevalent in rural and remote areas of the world, where people rely on agriculture, hunting, fishing, and gathering for their livelihood. Traditional economies are usually self-sufficient, with people producing goods for their own use or for barter with other individuals or families.

In a traditional economy, the division of labor is based on age, gender, and family status. For instance, men are responsible for hunting and fishing, while women are responsible for cooking, cleaning, and taking care of children. Children learn the skills and traditions of their parents and grandparents and continue the same work as they grow older.

One of the main advantages of a traditional economy is that it promotes social and cultural cohesion. People share a common identity and a sense of belonging, which leads to a strong community. However, a traditional economy has several disadvantages, such as limited technological advancements, lack of innovation, and limited access to education and healthcare.

Command Economy Definition

A command economy is an economic system in which the government makes all the decisions regarding production, distribution, and consumption of goods and services. In a command economy, the government controls all the resources, sets the prices of goods and services, and decides how much to produce and distribute.

The main goal of a command economy is to achieve social equality and eliminate poverty by distributing resources equally among all citizens. The government provides basic goods and services, such as healthcare, education, and housing, to all citizens free of charge. However, a command economy has several disadvantages, such as lack of incentives, inefficiency, and lack of consumer choice.

What is a traditional economy?

A traditional economy is an economic system in which people produce and distribute goods and services based on customs, traditions, and beliefs that have been passed down from generation to generation. The primary focus is on subsistence, and there is limited economic growth and technological advancement.

What is a command economy?

A command economy is an economic system in which the government controls all aspects of production, distribution, and pricing of goods and services. The government determines what goods and services are produced, who produces them, and how they are distributed.

What is the primary difference between traditional and command economies?

The primary difference is the role of government in the economy. In a traditional economy, the government has limited involvement, and production and distribution are based on customs and traditions. In a command economy, the government controls all aspects of production and distribution.

Which economic system promotes individual freedom?

Traditional economies promote individual freedom since people are free to produce and consume goods and services based on their customs and traditions. In contrast, command economies limit individual freedom since the government controls all aspects of production and distribution.

Which economic system is more efficient?

A command economy can be more efficient since the government can allocate resources efficiently and prioritize industries that are vital for national security or strategic importance. However, the lack of competition and incentives for innovation can lead to inefficiencies in production and distribution. In contrast, a traditional economy can be inefficient due to the lack of incentives and technological advancements.

Which economic system promotes technological advancement?

A command economy promotes technological advancement since the government invests heavily in research and development and prioritizes technological advancements to improve the country's economic growth. In contrast, a traditional economy has limited incentives for technological innovation.

Which economic system is more prevalent in the world today?

Most countries today have a mixed economy, which is a combination of traditional, market, and command economies. However, some countries, such as North Korea and Cuba, have a command economy, while others, such as some Indigenous communities, still have a traditional economy.

Main Differences Between Traditional Economy and Command Economy

Ownership of Resources

The ownership of resources is one of the significant differences between traditional and command economies. In a traditional economy, resources are owned by individuals and families who have been using them for generations. There is no central authority that controls the resources. People produce goods and services for their own use or for barter with others.

In contrast, in a command economy, the government owns all the resources and controls their distribution. The government decides how much to produce, what to produce, and at what price to sell. Private ownership of resources is limited, and the government controls most of the economic activities.

Role of the Government

The role of the government is another significant difference between traditional and command economies. In a traditional economy, the government has a limited role in economic activities. The government does not interfere with the production, distribution, and consumption of goods and services. Individuals and families make their own decisions and rely on customs, traditions, and beliefs.

In contrast, in a command economy, the government plays a dominant role in economic activities. The government decides what goods and services to produce, how much to produce, and at what price to sell. The government also controls the distribution of resources and decides who gets what. The government sets the rules and regulations, and everyone has to follow them.

Division of Labor

The division of labor is also different in traditional and command economies. In a traditional economy, the division of labor is based on customs, traditions, and beliefs. People specialize in certain tasks based on their age, gender, and family status. For example, men are responsible for hunting and fishing, while women are responsible for cooking, cleaning, and taking care of children.

In contrast, in a command economy, the division of labor is based on the government's plan and objectives. The government decides which industries to prioritize, and individuals are assigned jobs based on their skills and abilities. The government can also mandate individuals to work in certain industries or locations, even if it's not their preferred field.

Innovation and Technological Advancement

Innovation and technological advancement are more prevalent in a command economy than a traditional economy. In a command economy, the government invests heavily in research and development and prioritizes technological advancements to improve the country's economic growth. The government can also allocate resources towards developing industries that are vital for national security or strategic importance.

In contrast, in a traditional economy, there is a lack of incentives for technological innovation. People rely on traditional methods and techniques for production and distribution, and there is limited access to education and training to learn about new technologies.

Efficiency

Efficiency is also a significant difference between traditional and command economies. In a traditional economy, production and distribution are often inefficient due to the reliance on traditional methods and lack of technological advancements. There is also a limited access to resources and education, which can hinder economic growth.

In contrast, in a command economy, the government can enforce strict regulations and allocate resources efficiently towards specific industries. However, the lack of competition and incentives for innovation can lead to inefficiencies in production and distribution.

Consumer Choice

Consumer choice is another significant difference between traditional and command economies. In a traditional economy, consumers have limited choices when it comes to goods and services. People produce goods for their own use or for barter with others, and there is limited access to goods and services outside of their community.

In contrast, in a command economy, the government decides what goods and services are produced and distributed, and there is limited consumer choice. Consumers may not have access to goods or services they desire, or the government may dictate the quality and price of goods and services.

What Is the Main Difference Between Traditional Economy and Command Economy Examples?

The main difference between traditional economy and command economy is the level of government control over the economy. In a traditional economy, production and distribution of goods and services are based on customs, traditions, and beliefs that have been passed down from generation to generation. In contrast, in a command economy, the government controls all aspects of production, distribution, and pricing of goods and services.

Here are some examples that illustrate the differences between traditional and command economies:

Example of Traditional Economy:

An example of a traditional economy can be found among some Indigenous communities in the Amazon region. These communities rely on subsistence farming, hunting, and fishing as their primary sources of food and income. The production and distribution of goods and services are based on their customs and traditions, and the community members work together to ensure everyone has access to basic needs.

For instance, the Yanomami people of the Amazon rainforest in Brazil and Venezuela live in small, isolated communities where they hunt, fish, and grow crops for their own consumption. The Yanomami believe in the importance of communal living, and they share resources and work together to ensure everyone has access to basic needs. In this way, the Yanomami economy operates on the basis of traditions and customs that have been passed down from generation to generation.

Example of Command Economy:

An example of a command economy can be found in North Korea. In North Korea, the government controls all aspects of the economy, including the production and distribution of goods and services. The government prioritizes industries that are vital for national security or strategic importance, such as military and heavy industries, and mandates individuals to work in these industries based on their skills and abilities.

For instance, the North Korean government mandates that all citizens must work in state-run factories or farms, and the government determines the prices and distribution of goods and services. There is limited consumer choice, and the government controls all media and communication channels to ensure that citizens are not exposed to ideas that contradict the government's ideology.

In summary, while traditional economies rely on customs and traditions to guide the production and distribution of goods and services, command economies rely on government control to prioritize industries and allocate resources. These examples illustrate the significant differences between these two economic systems.

Conclusion

In conclusion, traditional and command economies have significant differences in terms of ownership of resources, the role of government, division of labor, innovation and technological advancement, efficiency, and consumer choice. While a traditional economy promotes social and cultural cohesion, it can hinder economic growth due to the lack of incentives and technological advancements. In contrast, a command economy can prioritize economic growth and technological advancements, but it can also limit individual freedoms and consumer choice. Understanding the differences between these economic systems can help individuals and policymakers make informed decisions about the best economic system for their community or country.