A command economy is an economic institution in which a central government authority, rather than market forces, directs the production, allocation and pricing of goods and resources, typically through central planning bodies that set output targets for industries and regions. The Soviet Union's Five-Year Plans and the centrally planned economies of the twentieth-century communist bloc are the most widely studied examples, contrasted institutionally with market economies coordinated through decentralized price signals. Command economies have generally aimed to direct resources toward state priorities such as rapid industrialization or military production, though they have also been associated with chronic inefficiency and shortages, prompting most former command economies to adopt market-oriented reforms by the late twentieth century.
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Cartel-style coordinated production planning among firms bears structural similarity to the centralized planning of a command economy, though a cartel is a voluntary arrangement among nominally independent private actors.
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