Question

How do command societies address the problem of scarcity? Illustrate your answer with examples.

Short answer

Command societies address scarcity by centrally planning resources according to state goals, prioritizing essential goods like food and housing.

Step-by-step solution

Define Scarcity

Scarcity refers to the fundamental economic problem of having seemingly unlimited human needs and wants, in a world with limited resources. Scarcity means that there is never enough of something to satisfy all conceivable human wants, even at advanced states of human technology.

Understand Command Societies

Command societies, also known as planned economies, are systems where the government makes all decisions about the production and consumption of goods and services. The central authority determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale.

Explore How Command Societies Address Scarcity

In a command society, the government allocates resources to address scarcity by prioritizing production based on national goals and needs rather than market demands. The government decides which goods and services are most necessary and allocates the limited resources accordingly, often focusing on essential goods like food and housing.

Provide Examples from History

The Soviet Union is a historical example of a command society. During its existence, the government made decisions to ensure that basic needs such as education, healthcare, and employment were met for all citizens, aiming to distribute resources to reduce scarcity in essential areas. Another example is North Korea, where the government controls nearly all aspects of economic production to address and manage scarce resources.

Key concepts

Scarcity

Scarcity is a central concept in economics, referring to the challenge of limited resources against unlimited wants and needs. In simpler terms, there are only so many things like food, water, land, and time, but people always seem to want more than what is available. Even with modern technology, we can’t produce endless amounts of everything.

• Scarcity is caused by limited resources and unlimited human wants.
• It forces societies to choose how to best allocate their resources.
• This concept affects personal decisions (like how individuals spend money) and larger societal decisions (like how the government chooses to allocate funding).

Understanding scarcity helps us see why priorities must be set and why not all needs and wants can be fulfilled. This makes resource allocation an ongoing concern for any economic system.

Planned Economy

A planned economy, often referred to as a command economy, is where the government controls all the major aspects of economic activity, such as production and the distribution of goods and services. In this system, the government makes the key decisions rather than individual businesses or the open market.

• Decisions about what to produce, how much, and at what price are made centrally.
• The government prioritizes production according to its own goals and perceived needs of the society.
• This contrasts with a market economy, where these decisions are driven by consumer demand and private businesses.

Planned economies aim to use resources efficiently by aligning the production goals with the nation’s needs. For example, during the times of the Soviet Union, the government decided on the production focus towards goods like machinery and heavy industrial products to meet state objectives.

Resource Allocation

Resource allocation is the process of deciding how to distribute scarce resources in a way that addresses a society’s needs and priorities. In a command economy, this process is centrally controlled by the government.

• The objective is to meet essential needs while working with limited resources.
• Prioritization is typically on fundamental goods and services like healthcare, education, and housing.
• The government steps in to direct resources towards these goals rather than relying on market forces.

In historical contexts, like the Soviet Union, resources were directed towards building infrastructure and providing basic services to minimize the impact of scarcity on the population. However, this often resulted in shortages of consumer goods due to the lack of flexibility and feedback mechanisms present in free markets.