"Looking at the command economy considering the basic economic problems - the making process in the solution of the “what to produce?” question is replaced by the collective preferences of the central planners. Another problem “how to produce?” is solved by the central planners who decide on not only quantities of output but also on appropriate methods of production. The central planners also have to coordinate all features of productive activity throughout an organized system of resource allocation. The last important economic question “for whom?“ is also planned because the central planners set the forces that determine the relative rewards. That is why the market forces are not given full expression to determine wage-rates. 13

On the one hand the government does not have to rely on the decisions of millions of individuals that will not always be in the happiness of the public as a whole. It can also direct the nation’s resources in agreement with specific national goals. In fact unemployment can be avoided if the government carefully plans the allocation of labour in accordance with the production requests and labour ability.

On the other hand the larger and more complex the economy, the greater task of collecting and analysing the information essential to planning. Moreover, if there is established no system of prices, or if prices are located by the state, planning mostly involves the ineffective use of resources. Furthermore it is difficult to set up suitable reasons to encourage workers and managers to be more productive without a decline in quality. Clearly the complete state control over resource allocation involves a significant loss of individual liberty; workers have no choice where to work, consumers have no choice what to buy. In fact the government can insist on its plans even if they were unpopular. And lastly if production is designed, but consumers are faced to spend money earnings as they wish, then the government faces the problem of avoiding shortages and surpluses.14 Most planned economies are socialist; however Hungary and Yugoslavia (before 1990) were socialist ones with lively elements of market mechanism. The best example of the planned economy is certainly Russia in its period of communism (as well before 1990)."