The Theory

The theoretical utopia of communism is summarized with a quote by Karl Marx "From each according to their abilities, to each according to their needs." In theory, everyone does what they do, what they are best at doing, without the driving force of wages, incomes, or the prospects of reward. Dr. Dowrimple T. Bedside, for example, would perform surgery and administer health care, because that is what he does. Becky Carpenter, in contrast, would make outdoor furniture, because that is what she does. Everyone does what they do to contribute to the common good.

However, because Dr. Bedside is unmarried, with no children, and needs very little income to maintain his existence, he would receive very little of society's production. But Becky Carpenter has five children and thus needs more income and a larger share of society's production.

And The Practice

• Government Ownership: In the practice of real world communism, government assumes ownership and control of most resources. Rather than ownership by society as a whole, what is termed dictatorship of the proletariat, government leaders control the resources, or what is essentially a government dictatorship of the economy. While government economic dictatorship does not necessarily mean a government political dictatorship, they often go together.


• Central Planning: Without markets, resource allocation decisions are undertaken through central planning by government. While central planning exists to some degree even in market-oriented capitalist economies, the level of detail needed under communism is extensive. Every input, every output, every intermediate good, every worker, every resource is allocated based on a predetermined plan. Such planning is inherently less flexible and less efficient that markets.

A Mixed Economy

Real world communism, like all other real world economic systems, is thus a mixed economy. Allocation decisions are undertaken by both governments and markets. In theory, markets cease to exist with communism. In practice, however, market exchanges do take place even though such exchanges are often informal and might even be illegal.

(In)Efficiency

Theoretically, communism has no mechanism for achieving an efficient allocation of resources. With markets, goods and resources are allocated based on the satisfaction of wants and needs reflected by prices. Prices provide the incentives to achieve efficiency. In theory, efficiency can be achieved with markets. With communism goods and resources are allocated from each according to ability to each according to need. However, there is no mechanism to reflect either ability or need. There is no way to ensure that goods and resources will be produced by those with the best ability nor distributed to those with the greatest need.

Real world communism compounds this theoretical lack of efficiency with the inefficiency of central planning.

• First and foremost, the resources used for the central planning process cannot be used to undertake actual production. In other words, a person (the planner) who spends eight hours calculating how much flour is needed to produce bread, is not actually producing any bread.


• Second, the central planning process, being developed and implemented by mere humans, is inherently flawed. Mistakes will happen. Inputs are sent to the wrong factories. A decimal point is misplaced. Too much of one good is produced and too little of another. All of these mistakes mean less output is produced with available resources.