Disadvantages of a social economy

The numerous disadvantages of a social economy include:
 
Reduction of consumer sovereignty. Under a social economy, consumer sovereignty is very much reduced. The state decides what is to be produced, and consumers hardly influence production compared to those in free enterprise economies. Due to this therefore, there are likely to be shortages of certain commodities and surpluses of others, with no automatic mechanism for their removal.
 
This is creativity and innovation which is lacking inthe public Sector
 
Inefficiency. There is less incentive to increase efficiency due to the
absence of profit motive. In market economies, any increase in the
efficiency of firms will lower costs of production and increase profits. This provides a powerful incentive to improve efficiency, encouraging the application of the latest technologies through research, which is not the case under a social economy.
 
Absence of competition. The absence of competition in a social economy is a disincentive to efficiency. There is less competition among firms since each firm responds to the instructions it receives from the planners. If planners issue instructions for the continued production of any good or service, firms must do so even if they are incurring losses.
Bureaucratic structures. There are bureaucratic structures in social
economy which result into inefficiency.
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