Planned economy

A planned economy is a type of economic system where the distribution of goods and services or the investment, production and the allocation of capital goods takes place according to economic plans that are either economy-wide or limited to a category of goods and services. A planned economy may use centralized, decentralized, participatory or Soviet-type forms of economic planning.^[1]^[2] The level of centralization or decentralization in decision-making and participation depends on the specific type of planning mechanism employed.^[3]

Socialist states based on the Soviet model have used central planning, although a minority such as the former Socialist Federal Republic of Yugoslavia have adopted some degree of market socialism. Market abolitionist 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.^[4]^[5]^[6] 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.^[7]

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 variously referred to as planned market economies, mixed economies and mixed market economies. A command economy follows an administrative-command system and uses Soviet-type economic planning which was characteristic of the former Soviet Union and Eastern Bloc before most of these countries converted to market economies. This highlights the central role of hierarchical administration and public ownership of production in guiding the allocation of resources in these economic systems.^[8]^[9]^[10]

^ Alec Nove (1987). "Planned Economy". The New Palgrave: A Dictionary of Economics. vol. 3. p. 879.
^ Devine, Pat (2010). Democracy and Economic Planning. Polity. ISBN 978-0745634791.
^ Gregory, Paul R.; Stuart, Robert C. (2003). Comparing Economic Systems in the Twenty-First Century. Boston: Houghton Mifflin. pp. 23–24. ISBN 978-0-618-26181-9.
^ Prychito, David L. (2002). Markets, Planning, and Democracy: Essays After the Collapse of Communism. Edward Elgar Publishing. p. 72. ISBN 978-1840645194. Traditional socialism strives to plan all economic activities comprehensively, both within and between enterprises. As such, it seeks to integrate the economic activities of society (the coordination of socially owned property) into a single coherent plan, rather than to rely upon the spontaneous or anarchic ordering of the market system to coordinate plans.
^ Mandel, Ernest (1986). "In Defence of Socialist Planning" (PDF). New Left Review. 159: 5–37. Archived (PDF) from the original on 2008-05-16. Planning is not equivalent to 'perfect' allocation of resources, nor 'scientific' allocation, nor even 'more humane' allocation. It simply means 'direct' allocation, ex ante. As such, it is the opposite of market allocation, which is ex post.
^ Ellman, Michael (1989). Socialist Planning. Cambridge University Press. p. 327. ISBN 978-0521358668. '[S]ocialist planning', in the original sense of a national economy which replaced market relationships by direct calculation and direct product exchange, has nowhere been established [...].
^ Cite error: The named reference :1 was invoked but never defined (see the help page).
^ Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart (1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Pub. p. 4. ISBN 978-0-15-512403-5. Almost all industry in the Soviet Union is government owned and all production is directed, in theory, by a central plan (though in practice much is left for local discretion and much happens that is unplanned or not under government control).{{cite book}}: CS1 maint: multiple names: authors list (link)
^ Wilhelm, John Howard (1985). "The Soviet Union Has an Administered, Not a Planned, Economy". Soviet Studies. 37 (1): 118–130. doi:10.1080/09668138508411571.
^ Ellman, Michael (2007). "The Rise and Fall of Socialist Planning". In Estrin, Saul; Kołodko, Grzegorz W.; Uvalić, Milica (eds.). Transition and Beyond: Essays in Honour of Mario Nuti. New York: Palgrave Macmillan. p. 22. ISBN 978-0-230-54697-4. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].

[1] Alec Nove (1987). "Planned Economy". The New Palgrave: A Dictionary of Economics. vol. 3. p. 879.

[2] Devine, Pat (2010). Democracy and Economic Planning. Polity. ISBN 978-0745634791.

[3] Gregory, Paul R.; Stuart, Robert C. (2003). Comparing Economic Systems in the Twenty-First Century. Boston: Houghton Mifflin. pp. 23–24. ISBN 978-0-618-26181-9.

[4] Prychito, David L. (2002). Markets, Planning, and Democracy: Essays After the Collapse of Communism. Edward Elgar Publishing. p. 72. ISBN 978-1840645194. Traditional socialism strives to plan all economic activities comprehensively, both within and between enterprises. As such, it seeks to integrate the economic activities of society (the coordination of socially owned property) into a single coherent plan, rather than to rely upon the spontaneous or anarchic ordering of the market system to coordinate plans.

[:0-5] Mandel, Ernest (1986). "In Defence of Socialist Planning" (PDF). New Left Review. 159: 5–37. Archived (PDF) from the original on 2008-05-16. Planning is not equivalent to 'perfect' allocation of resources, nor 'scientific' allocation, nor even 'more humane' allocation. It simply means 'direct' allocation, ex ante. As such, it is the opposite of market allocation, which is ex post.

[6] Ellman, Michael (1989). Socialist Planning. Cambridge University Press. p. 327. ISBN 978-0521358668. '[S]ocialist planning', in the original sense of a national economy which replaced market relationships by direct calculation and direct product exchange, has nowhere been established [...].

[:1-7] Cite error: The named reference :1 was invoked but never defined (see the help page).

[8] Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart (1988). Comparing Economic Systems: A Political-Economic Approach. Harcourt College Pub. p. 4. ISBN 978-0-15-512403-5. Almost all industry in the Soviet Union is government owned and all production is directed, in theory, by a central plan (though in practice much is left for local discretion and much happens that is unplanned or not under government control).{{cite book}}: CS1 maint: multiple names: authors list (link)

[The_Soviet_Union_Has_an_Administered,_Not_a_Planned,_Economy,_1985-9] Wilhelm, John Howard (1985). "The Soviet Union Has an Administered, Not a Planned, Economy". Soviet Studies. 37 (1): 118–130. doi:10.1080/09668138508411571.

[10] Ellman, Michael (2007). "The Rise and Fall of Socialist Planning". In Estrin, Saul; Kołodko, Grzegorz W.; Uvalić, Milica (eds.). Transition and Beyond: Essays in Honour of Mario Nuti. New York: Palgrave Macmillan. p. 22. ISBN 978-0-230-54697-4. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].

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