Planned (or Command) Economies
Command economies operate very differently. In a command economy, economic effort is devoted to goals passed down from a ruler or ruling class. Ancient Egypt was a good example: a large part of economic life was devoted to building pyramids, for the pharaohs. Medieval manor life is another example: the lord provided the land for growing crops and protection in the event of war. In return, vassals provided labor and soldiers to do what the lord ordered. In the last century, communist political systems emphasized command economies.
command economy
In a command, or planned, economy, resources and businesses are owned by the government. The government decides what goods and services will be produced and what prices will be charged for them. The government decides what methods of production will be used and how much workers will be paid. Some necessities, like health care and education, are provided for free, as long as the government determines that you need them.
Free Market vs. Command Economies
The primary distinction between a free and command economy is the degree to which the government determines what can be produced and what prices will be charged. In a free market, the collective decisions of the market itself, comprised of producers and consumers, determine what is produced and what prices are charged. Producers and consumers make rational decisions about what will satisfy their self-interest and maximize profits, and the market responds accordingly. In a planned economy, the government makes the most decisions about what will be produced and what the prices will be, and the market must follow that plan.
Communism is a political and economic system where all property is publicly owned and each person works and is paid based on their abilities and needs, with the goal of creating a classless society.