By comparison, the two theories are complete opposites of each other. Free enterprise as a concept refers to a market system where private businesses have the freedom to compete with minimum government regulations. In such a system, the only regulations imposed by the government are those aimed at protecting the interests of the public and maintaining a balance in the national economy. On the other hand, a command economy is one characterized by the control of the central government of the respective county. Therefore, in a command economy, the economic decisions are made by the government, as opposed to the case of a free enterprise where the government plays no role in the economy apart from what is necessary.
Characteristics of Free Enterprise
Further differences between the two can be found in their characteristics. For example, for the case of a free enterprise, the factors of production are controlled by private entities. The private ownership of these production factors consequently enables the private companies to generate their income. Also, the fact the companies themselves own these production factors, makes it much more convenient for them to carry out their operations, enabling them to produce high quality products, in the process generating good profit margins (Boardman, Anthony & Vining). As the name suggests, the market in this economic system is free. In that, the only factor influencing the prices of commodities are the laws of supply and demand. Therefore, using these laws, the businesses competing under this market system fight for market share, in an effort to achieve favorable profitability. To do this, goods and service are made available to the consumer in the highest price possible, while trying to maintain the cost of producing these goods and services at a minimum. With regards to the government, its main role in free enterprise is to level the playing field, to ensure that competitors compete in a manner that is fair. Another major characteristic of the free enterprise is embedded in the ownership of companies. Here, corporations are owned by shareholders whose control of the corporation is directly determined by the number of shares they hold. Usually, corporations have many shareholders such that they cannot all have a say in the business. For this reason, they elect representatives in the form of board of directors.