uction and consumption (e.g. the effects on the environment) could be taken into account, provided the government was able to predict these effects.In practice, a command economy could achieve these goals at considerable social and economic cost.For example: A large economy would require a large amount of interpretation from figures, the collection of this information is time consuming and inefficient. Complex plans are likely to have large administration cost and involve cumbersome bureaucracy. If prices do not reflect the scarcity of the product it is difficult to know if resources are being used efficiently. Incentives to boost production are likely to result in a drop in quality are therefore would require a large number of officials to check the quality. Loss of individual liberty as workers would be assigned to jobs rather than having a choice, consumers would only be able to buy certain goods. The government would have to enforce plans, however unpopular, which it believed to be in the common interest. If production is planned, but consumers are free to spend income as they wish, problems of shortages and surpluses arise as consumer wishes change.In practise all economies are a mixture of a command and free economy and it is therefore the degree of government intervention that distinguishes different economic systems. Consumer SovereigntyIn a capitalistic market economy, consumer sovereignty is a key factor in the effective working of the price mechanism. As Adam Smith said " Consumption is the sole end and purpose of all production and the interest of the producer ought to be attended to only as far as it is necessary for promoting that of the consumer"In other words, without the consumer the producer is nothing. Consumers are able to vote with their money by offering more of it for products that are in greater demand and less of it for products that are not in demand. Shifts in supply and demand will occur in response to the wa...
