A command economy is one in which all aspects of the economic system of a specific nation are controlled to some degree by a centralized body, usually the government. The characteristics of a command economy ensure that every step in the production process, from utilization of resources to volume produced to wages earned by labor, is controlled by the government. It also means that such an economy redistributes wealth as the ruling power sees fit. As a result, one of the chief characteristics of a command economy, also known as a planned economy, is that the individual pursuit of wealth is replaced by a concerted effort from all economic channels to improve society as a whole.

There are two types of economies prevalent in the world. Most countries prefer a market economy, which is characterized by a market for goods and services predicated on the laws of supply and demand and unfettered by any sort of outside control. By contrast, the characteristics of a command economy dictate that every decision involving the economy is made by the centralized government, as in the former Soviet Union or current-day China.

Very often, the characteristics of a command economy come to light when shown in contrast to those of a market economy. For example, production levels are decided upon in a market economy depending on what kind of demand there is for a particular product. In a command economy, the governing body decides what is produced and to what section of the country it should be allocated.

Pricing is another part of a command economy which falls under the authority of the government. Since profits are funneled back to the government, price levels are ideally set up so that there is some benefit to the country at large. This occurs when the government redistributes the wealth throughout society, by deciding upon wages for labor and by using the money for government products to benefit the citizens.

Of all the characteristics of a command economy, perhaps the most general and definitive is the overall subordination of the individual to the collective. If done properly, a command economy can efficiently manage resources so that there is minimal waste and also keep prices at a level which benefits a vast majority of the populace. Labor can also be controlled to discourage high unemployment. All of these benefits come at the expense of certain individual freedoms related to amassing personal wealth.