Economy of ordering is an economic system in which the government, or the basic planner, decides which goods and services are to be produced, the supply to be produced and the price of goods and services. Other examples of countries with economic growth are Cuba, North Korea and the former Soviet Union.
Corporate Governance in the Department of Economics
In the passing economy, the government controls the major aspects of economic production. Government determines the means of production and owns the goods and services industries. The government pays for and produces goods and services that it thinks will benefit the people.
A world with a controlled economy concentrates on major financial goals and political thinking to determine what goods and services the country produces and how much it will produce. It usually has the biggest goals of the country and the government it wants to meet, and they will produce goods and services to do that. The government allocates its resources according to these goals and considerations.
For example, suppose a communist country with an unstable economic system has the greatest economic goals of producing military equipment to protect its citizens. The country fears that it will go to war with another country within a year. The government decides that it must produce more guns, tanks, and arrows and train its soldiers. In this case, the government will produce more military equipment and put more resources into it. It will reduce the production and supply of goods and services that the general public does not need. However, the population will continue to receive basic needs. In this country, the government feels that military goods and services work well for society.
How does Command Economies control Surplus Production and How Does Price Work?
Historically, economic orders do not have the luxury of mass production; chronic shortages are the norm. Since the days of Adam Smith, economists and public figures have debated the problem of more products (and less understanding, its corollary). These problems were largely solved by 19th-century economist Jean-Baptiste Say, who showed that generalized production is not possible when the pricing process is in place.
To see the constitution of Say's law, think of an economy that has the following assets: coconuts, jumpsuits and fish. Suddenly, three fish delivery. This does not mean that the economy will become overcrowded, that workers become poorer, or that production will cease to make a profit. Instead, the purchasing power of fish (related to jumpsuits and coconuts) will decrease. The price of fish is falling; other resources can be released and then converted to jumpsuit and coconut production. The standard of living will increase, even though the allocation of human resources may look different.
Economic orders also did not address unemployment, because labor participation is forced by the state; employees do not have the option to not work. You might end the unemployment by giving everyone a shovel and instructing them (under threat of arrest) to dig holes. It is clear that unemployment (per se) is not a problem; the work requires productivity, which requires that you can move freely where appropriate.
Why Did Command Economics Fail?
The economic orders took much of the blame for the collapse of the Soviet Union's economy and its existing conditions in North Korea. The lesson of the second half of the twentieth century was that capitalism and free markets were more productive than societies and economists.
Three broad explanations have been given for such failures: science has failed to change the nature of human motivation and competition; the systems of the political government have corrupted the decisions of the corrupt and corrupt orders; and economic accounting has proven to be impossible in a social context.
