Property Rights and Incentives: 

Generally in a command economy, the government is the primary decision maker. It is the government decides a central plan which determines what goods and services are to be produced, how to allocate resources to produce it and how and to whom the goods and services are to be sold. However, this kind of an economic system also has certain limitations. One of the main problems in a command economy arises from the fact that no one person owns the resources that are used in the production of goods and services. Because of this particular feature, people have less of a motive to use resources as efficiently as possible. Private ownership of the resources provides a self interested motive to use them wisely or efficiently- that is, because the resource owner will gain if the resources are used well, so he or she would have the incentive to make sure that they are put to the best possible use, or used well. In a market economy, then, the protection of property rights is essential because people respond to these incentives. They weigh the cost and benefits of the possible action and take actions that offer the greatest benefits for the least cost. Apart from this, many people would argue that property rights must be protected to encourage people to use their property in certain ways- in particular to risk it by opening and finding businesses. People do this because they believe they can gain more for themselves. If the property rights are protected, the acquisition of property or wealth will be the benefit against which they weigh the risk of losing their property. Secure property rights are thus an important part of the incentive to take risk, and risk taking is vital to success in a market economy. A market economy thus acquires a legal system that can protect property rights.