Answer to Question #160540 in Economics for lisa Davis

Question

why does a command economy require a large bureaucracy

Answer 1

In a command economy, everything is controlled by the state, more specifically by the supreme governing body. There are many areas in the economy in which many enterprises operate in different regions. Depending on the size of the country, the number of enterprises can range from several hundred to tens of thousands. Human ability to receive and process information is limited, and it takes a lot of people to process all the data generated by the economy. But since the number of final managers is limited, it is necessary to summarize the information several times and solve some of the problems before the final data reaches the top. Thus, but the top receives a quantity of data that can be processed, this requires a multi-level hierarchy with a huge number of people.