Maybe I'm not explaining myself very well. Let me try again...
Well first this depends on what we mean by economic and what is actually required of an economy, what is it and what is it there for?
An economy is the set of social relationships determining what is produced, how much is produced and who it is produced for. In a market economy, most of these decisions are made by individual buyers and sellers brought together in the market. In a command economy, most of these decisions are made by whatever government body or figure is given control by whoever is in power. Frequently, the person in power of a command economy is a dictator, but this is not necessary in theory nor always true in fact. The basic question we are trying to answer in this thread is which economic system is "better" (scare quotes because I'm well aware there's a variety of ways to define "better" in this context).
Because we live in a world of scarcity, we must make choices as to how we use our limited resources. One might describe it as the fundamental human problem. The government must decide which public programmes are most in need of funds (e.g. the NHS), and which are least in need (e.g. arts). You the consumer must decide if you want to blow all your money now on expensive sandwiches and cocaine, or save up for that summer holiday in the Seychelles. We can see from our two definitions above that in a command economy (like the USSR) all decisions relating to the management of scarce resourses (i.e. what is being produced, how much is being produced and who it is being produced for) are made by a government body. Possibly the people on this government body are fantastically intelligent, with degrees in theoretical physics from Oxbridge, possibly not. But the fundamental thing to remember is that resources are limited and choices will have to be made. In a market economy, on the other hand, the individual makes his or her choices as they see fit. Resources are not managed from the top down, but are left to be put into operation at the micro level. Collective decisions then emerge in aggregate.
Let's take our two states, the command and the market, and look at a simple economic model. Imagine you are the head of the economic planning committee in the Socialist Republic of Britain. You need to make bread. We all want to eat bread. How do you know? Well, it's just fucking obvious, isn't it? Everyone eats bread, it's a staple food source. So that's good - quite a simple decision that could easily be harder if it wasn't such a universally consumed product. It might be very difficult to decide if other things you know very little about, possibly that have just been invented, should be mass produced. But let's gloss over the really difficult questions and focus on what we know that we know. Make bread. How much bread should we make? Er -- fuck. Ok, how much bread did we sell when we were a market economy? Good job we are able to compare our figured decisions to actual market outcomes, because that helps to make sense of it all. Add to that number or amount the opinion of the petty bureaucrat (i.e. you): every family gets two loaves a week. That way, the same amount of bread consumed under market conditions is consumed under command economy conditions. Great. Is this an improvement? You have redistributed bread such that rather than having individuals buy and sell the total amount of bread they desire, you, in your Oxbridge wisdom, have decided for them. This is the very essence of Communism and to me, this is a morally bankrupt economic system. It shouldn't be something that you the government impose on me the individual. But at least at this stage it's possible that you could describe this as fairer, because everyone gets the same amount of bread. Note that the success of command economies along this (moral) dimension of fair distribution of consumables is reliant
entirely on the good will and sense of the person in charge. You have to put a lot of faith in the dear leader, and historically the dear leader hasn't done a brilliant job.
However, the economic failure that this leads to is much deeper and more fatal than the immorality of having a government committee make everyone's decisions for them... Why? Because resources are scarce and it is not anywhere near as simple as saying, "how much bread do we need? Right-o, that's sorted then!"
Really think about this. First of all, you need to decide how much bread you want to give everyone. Then you need to make it. Here's where communism meets reality. Yeast flour and salt, and probably some preservatives. That's all you need to make bread. Of course, you also need somewhere to make it (a factory), some stuff to make it with (capital goods), and some people to operate the stuff (slaves... sorry,
workers). Under a market economy the owner of a factory will sell it or rent it to whoever wants to buy at a price he or she finds appropriate. The producers of capital goods will sell or rent them to individuals or firms who want to buy at a level they find appropriate. And workers will sell their labour to firms who want to buy at a level they find appropriate. Everyone in a market economy makes a trade off between what they have to sell and what they will receive for it (i.e. the
price). No government involvement is required, but bread is produced and sold on the open market every day.
Under a command economy, the situation is very different, because you have one single entity trying to make all these tiny micro level decisions. What does this actually mean? It's about how you make trade offs with your scarce resources. Remember the pictures of lines of people waiting for bread in the USSR -- this is the reason why there were shortages. It all boils down to the fact that prices "clear" markets, i.e. that prices regulate supply and demand. You tell you factories in the Socialist Republic of Britain to make bread, and that's what they do. You tell your producers of capital goods to make ovens and that's what they do. You tell your farmers to grow wheat and your steel manufacturers to make steel, and that's what they do. In the absence of any other needs, everything is fine, because no choices have to be made. But this isn't the world we live in. In the world we live in, resources are scarce. At what point do you tell your steel manufacturers, "hey, slow down production, we have a surplus"? At best, only when you already have a surplus. Under a market economy, the
price of steel would go down, and individuals would shift resources away from steel manufacturing towards something more profitable. What happens when you have a crop failure, and you run out of wheat? Under a market economy, the price of wheat would rise, and so would the price of bread. Producers and consumers would look for alternatives. But you don't have individual decision makers, just you and your comittee. What are you going to do? You're going to have a bread shortage.
Step back from the micro one good perspective: what else does your economy need? Shit -- that's a pretty hard question to answer. You basically have no real idea beyond the vague and obvious: food, shelter, energy. How do you know if too much of your resources are being used up in the production of bread? You don't, because you can't, because you have no way of knowing, because there are no price changes, because there is no price. You have to guess. I guess that we will consume X amount of bread, therefore we will order our manufacturers to make X amount of capital goods, which I'm guessing is the approriate level, for which I guess we will need X amount of steel and other materials, and I'm just going to hope that these are productive firms, but I have no way of knowing that either because they aren't competing at the level of price, but rather are being subsidised by we the government. In fact, communism historically has simply tried to appropriate market economy levels, because it has no other way to judge and no basis on which to make decisions where scarce resources are traded off against different ends.
[cont... apologies for the boring length of this...]