Planned economy

A planned economy is a type of economic system where investment and the allocation of capital goods take place according to economy-wide economic and production plans. A planned economy may use centralized, decentralized or participatory forms of economic planning.[1][2] Planned economies contrast with unplanned economies, specifically market economies, where autonomous firms operating in markets make decisions about production, distribution, pricing and investment. Market economies that use indicative planning are sometimes referred to[by whom?] as planned market economies.

A command economy or administrative command economy describes a country using Soviet-type economic planning which was characteristic of the former Soviet Union and Eastern Bloc before most of these countries converted to market economies. These terms highlight the central role of hierarchical administration and public ownership of production in guiding the allocation of resources in these economic systems.[3][4][5] In command economies, important allocation decisions are made by government authorities and are imposed by law.[6]

Central planning has been used in the majority of countries adopting socialism including those based on the Soviet model, though a minority have adopted some degree of market socialism, such as the Socialist Federal Republic of Yugoslavia. Non-market socialism replaces factor markets with direct calculation as the means to coordinate the activities of the various socially-owned economic enterprises that make up the economy.[7][8][9] More recent approaches to socialist planning and allocation have come from some economists and computer scientists proposing planning mechanisms based on advances in computer science and information technology.[10]

Planned versus command economies

Planned economies contrast with command economies. A planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc."[11] whereas a command economy necessarily has substantial public ownership of industry while also having this type of regulation.[12]

Most of a command economy is organized in a top-down administrative model by a central authority, where decisions regarding investment and production output requirements are decided upon at the top in the chain of command, with little input from lower levels. Advocates of economic planning have sometimes been staunch critics of these command economies. For example, Leon Trotsky believed that those at the top of the chain of command, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and who understand/respond to local conditions and changes in the economy, and therefore would be unable to effectively coordinate all economic activity.[13]

Although historians have associated planned economies with Marxist–Leninist states and the Soviet economic model, some argue[weasel words] that the Soviet economic model did not actually constitute a planned economy in that a comprehensive and binding plan did not guide production and investment, therefore the further distinction of an administrative command economy emerged as a more accurate designation for the economic system that existed in the former Soviet Union and Eastern Bloc, highlighting the role of centralized hierarchical decision-making in the absence of popular control over the economy.[14] The possibility of a digital planned economy was explored in Chile between 1971 and 1973 with the development of Project Cybersyn and by Alexander Kharkevich [ru], head of the Department of Technical Physics in Kiev in 1962.[15][16]

Another key point is that command economies are inherently authoritarian whereas economic planning in general can be either participatory and democratic or authoritarian. Indicative planning is a form of planning in market economies that directs the economy through incentive-based methods. Economic planning can be practiced in a decentralized manner through different government authorities. For example, in some predominately market-oriented and mixed economies[which?] the state utilizes economic planning in strategic industries, such as the aerospace industry. Mixed economies usually employ macroeconomic planning while micro-economic affairs are left to the market and price system.

Note too the utilization of dirigisme, or government direction of the economy through non-coercive means, as practiced in France and in Great Britain after World War II. The Swedish government planned public-housing models in a similar fashion as urban planning in a project called Million Programme, implemented from 1965 to 1974.

Other Languages
Esperanto: Planita ekonomio
한국어: 계획 경제
Bahasa Indonesia: Ekonomi terencana
latviešu: Komandekonomika
Bahasa Melayu: Ekonomi terancang
日本語: 計画経済
norsk nynorsk: Planøkonomi
oʻzbekcha/ўзбекча: Buyruqbozlik usuli
Simple English: Command economy
srpskohrvatski / српскохрватски: Planska ekonomija
svenska: Planekonomi
Türkçe: Planlı ekonomi
Tiếng Việt: Kinh tế kế hoạch
吴语: 计划经济
粵語: 計劃經濟
中文: 計劃經濟