Decentralized planning (economics)

A decentralized-planned economy or decentrally-planned economy (occasionally horizontally-planned economy) is a type of economic system based on decentralized economic planning, in which decision-making is distributed amongst various economic agents or localized within production units. Decentralized planning is held in contrast to centralized planning where economic information is aggregated and used to formulate a plan for production, investment and resource allocation by a central authority. Decentralised planning can take shape both in the context of a mixed economy as well as in a post-capitalist economic system.

This usually implies some form of democratic decision-making within the economy or within firms in the form of economic democracy or industrial democracy. Alternatively, computer-based or computer-managed forms of decentralized coordination between economic enterprises have been proposed by various economists and computer scientists.[citation needed]

Recent proposals for decentralized-economic planning have used the term "participatory planning" to highlight the cooperative and democratic character of this system and to contrast it with centralized planning associated with the former Soviet Union. Proponents present decentralized and participatory economic planning as an alternative to market socialism for a post-capitalist society.[1]

Decentralized-planning has been proposed as a basis for socialism and has been advocated by democratic socialists and anarchists who advocate a non-market form of socialism while rejecting Soviet-type central planning. Some writers (e.g. Robin Cox) have argued that decentralised planning allows for a spontaneously self-regulating system of stock control (relying solely on calculation in kind) to come about and that in turn decisively overcomes the objections raised by the economic calculation argument that any large scale economy must necessarily resort to a system of market prices.[2]

Models

Cybernetics

The use of computers to coordinate production in an optimal fashion has been variously proposed for socialist economies. The Polish economist Oskar Lange argued that the computer is more efficient than the market process at solving the multitude of simultaneous equations required for allocating economic inputs efficiently (either in terms of physical quantities or monetary prices).[3]

The 1970 Chilean computer-controlled planned economy Project Cybersyn was pioneered by Salvador Allende's socialist government in an attempt to move towards decentralised economic planning with the experimental viable system model of computed organisational structure of autonomous operative units though an algedonic feedback setting and bottom-up Cyberfolk component.

Negotiated coordination

Economist Pat Devine has created a model of decentralized economic planning called "negotiated coordination", which is based upon social ownership of the means of production by those affected by the use of the assets involved, with the allocation of consumer and capital goods made through a partipatory form of decision-making plan by those at the most localised level of production.[4]

Participatory Planning

The planning structure of a decentralized planned economy is generally based on a consumers council and producer council (or jointly, a distributive cooperative), which is sometimes called a consumers' cooperative. Producers and consumers, or their representatives, negotiate the quality and quantity of what is to be produced. This structure is central to participatory economics, guild socialism and economic theories related to anarchism.