A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency. A planned economy may be based on either centralized or decentralized forms of economic planning, but usually refers to a centrally-planned economy. The goal of central planning is to enable planners to take advantage of more perfect information through a consolidation of economic resources when making decisions regarding investment and the allocation of economic inputs within production.
In an entirely centrally-planned economy, a universal survey of human needs and consumer wants is required before a comprehensive plan for production can be formulated. The public body responsible for production and resource allocation would require the power to allocate factors of production in order to fulfill the plan, and for overseeing the distribution system of the economy. The most extensive form of a planned economy is referred to as a command economy, centrally planned economy, or command and control economy. In such economies, central economic planning by the state or government directs all major sectors of the economy and formulates decisions about the use of economic inputs and the means of production. Planners would decide what would be produced and would direct lower-level enterprises and ministries to produce those goods in accordance with national and social objectives. Implementation of this form of economy is sometimes called planification.
Planned economies are held in contrast to unplanned economies, such as the market economy and proposed self-managed economy, where production, distribution, pricing, and investment decisions are made by autonomous firms based upon their individual interests rather than upon a macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning as components of a market-based or mixed economy, in which the state employs "influence, subsidies, grants, and taxes, but does not compel." This latter is sometimes referred to as a "planned market economy".
A planned economy may consist of state-owned enterprises, cooperative enterprises, private enterprises directed by the state, or a combination of different enterprise types. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, enterprises need not follow a comprehensive plan of production. That is, a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc." but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry. Therefore, command economies are planned economies, but not necessarily the reverse.
Beginning in the 1980s and 1990s, many governments presiding over planned economies began marketization (or as in the Soviet Union, the system collapsed) and moving toward market-based economies by allowing individual enterprises to make the pricing, production, and distribution decisions, granting autonomy to state enterprises and ultimately expanding the scope of the private sector through privatization. Although most economies today are market economies or mixed economies (which are partially planned), fully planned economies exist in the remaining few countries of Cuba, Libya, North Korea, Saudi Arabia, Belarus, and Burma.
Read more about Planned Economy: Economic Planning Versus The Command Economy, Planned Economies and Socialism, Transition From A Planned Economy To A Market Economy, Advantages of Economic Planning, Fictional Portrayals of Planned Economies
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... See also Planned economy and Five-year plan (disambiguation) A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a ... A command economy is a type of planned economy whereby plan directives are enforced through inducements in a vertical power-structure ...
... A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority ... Although a planned economy may be based on either centralized or decentralized forms of economic planning, it usually refers to a centrally planned economy ... Planned economies are usually categorized as a particular variant of socialism, and have historically been supported by and implemented by Marxist-Leninist socialist ...
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... Participatory economics Market socialism Lange model Mutualism Socialist market economy Planned economy Soviet-type planning Variants Agrarian Anarchist Democratic ... In a fully developed socialist economy, engineers and technical specialists, overseen or appointed in a democratic manner, would coordinate the economy in terms of ... The economy of the Soviet Union never reached this stage of development so planned its economy in financial terms throughout the duration of its ...
... Looking Backward by Edward Bellamy depicts a fictional planned economy in a United States c ... opposed aims The former is a consumer economy designed to engender productivity while the latter is a shortage economy designed as an agent of totalitarian social control ... Other literary portrayals of planned economies were Yevgeny Zamyatin's We, which was an influence on Orwell's work ...
Famous quotes containing the words economy and/or planned:
“Even the poor student studies and is taught only political economy, while that economy of living which is synonymous with philosophy is not even sincerely professed in our colleges. The consequence is, that while he is reading Adam Smith, Ricardo, and Say, he runs his father in debt irretrievably.”
—Henry David Thoreau (18171862)
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—Bible: New Testament, Matthew 1:18,19.