Planned economy - wikipedia Planned economy Part of a series on Economic systems By ideology Anarchist Capitalist Corporate Dirigist Laissez - faire Mercantilist Neo-mercantilist Protectionist Social market State capitalist Democratic Fascist Feminist Georgist Green Religious Christian Islamic Socialist Communist Market socialist Mutualist Participatory Socialist market Syndicalist Traditionalist Communalist Corporatist Distributist Feudalism By coordination Closed ( autarky ) Decentralized Digital Dual Gift Informal Market Mixed Natural Open Planned Robinson Crusoe Subsistence Underground Vertical archipelago Virtual By regional model Asian East Asian Chinese Singaporean European Anglo - Saxon German Nordic Rhenish Soviet Latin America Socialism of the 21st century Sectors Common property Private Public Voluntary Property types Collective ownership Commons Private ownership Public ownership Social ownership Transition Collectivization Communization Corporatization Demutualization Deregulation Expropriation Financialization Liberalization Marketization Municipalization Mutualization Nationalization Privatization Socialization Coordination Barter Market Free Open Regulated Planned In kind Cybernetic Indicative Material balancing Price Self - managed Peer - to - peer Shared Open access Other types Expeditionary Hunter - gatherer Inclusive Democracy Information Islamic economics Manorialism Newly industrialized Palace Plantation Plutonomy Post-capitalist Post-industrial Post-scarcity Resource - based Token Traditional Transition World Business and economics portal Part of a series on Socialism Development History of socialism Socialist calculation debate Socialist economics Ideas Socialist mode of production Calculation in kind Collective ownership Cooperative Common ownership Commune ( model of government ) Economic democracy Economic planning Equal opportunity Free association Industrial democracy Input -- output model Internationalism Labor - time calculation Labour voucher Material balance planning Peer ‐ to ‐ peer economics ( Sharing economy ) Production for use Social dividend Social ownership Socialism in One Country State ownership To each according to his contribution / needs Workplace democracy Workers ' self - management Models Decentralized planning Participatory economics Market socialism Lange model Mutualism Planned economy Soviet - type OGAS Project Cybersyn Socialist market economy Socialist - oriented market Variants African Arab Agrarian Anarchist Authoritarian Blanquism Communism Democratic Ethical Ecological Feminist Gandhian Guild Liberal Libertarian Market Marhaenism Marxism Municipal Owenism Reformism Religious Revolutionary Ricardian Scientific Social democracy Socialist nationalism State Syndicalism Technocracy Third World Utopian Zionist 21st - century History by country Australia Bangladesh Brazil Canada Estonia Hong Kong India Iran Netherlands New Zealand Pakistan Tunisia United Kingdom United States People Thomas More Henri de Saint - Simon François - Noël Babeuf Charles Hall Robert Owen Charles Fourier William Thompson Thomas Hodgskin Étienne Cabet Pierre - Joseph Proudhon Louis Blanc Mikhail Bakunin Karl Marx Friedrich Engels Ferdinand Lassalle William Morris Mary Harris Jones Peter Kropotkin Eduard Bernstein Errico Malatesta Fred M. Taylor Georgi Plekhanov John Dewey Enrico Barone W.E.B. Du Bois Vladimir Lenin Emma Goldman Rosa Luxemburg Joseph Stalin Léon Blum Bertrand Russell Antonie Pannekoek Luis Emilio Recabarren Albert Einstein Clement Attlee Mao Zedong Karl Polanyi Nestor Makhno G.D.H. Cole Imre Nagy Einar Gerhardsen George Orwell Léopold Sédar Senghor Tage Erlander Salvador Allende Michael Manley François Mitterrand Gamal Abdel Nasser Nelson Mandela Murray Bookchin Alexander Dubček Martin Luther King Jr. Mikhail Gorbachev Jack Layton Hugo Chávez Organizations First International ( International Workingmen 's Association ) Second International Third International ( Comintern ) Fourth International Fifth International Labour and Socialist International Socialist International World Federation of Democratic Youth International Union of Socialist Youth World Socialist Movement International Committee of the Fourth International Progressive Alliance Related topics Anarchism Capitalism Communist society Criticism of capitalism Economic system French Left List of socialist economists Nanosocialism Progressivism Right - wing socialism Socialism and LGBT rights Socialist Party Socialist state Socialism portal Economics portal Politics portal A planned economy is a type of economic system where investment and the allocation of capital goods is performed through economy - wide economic and production plans. A planned economy may be based on centralized, decentralized or participatory forms of economic planning. A command economy or administrative command economy is any of the nominally - planned economies of the former Soviet Union and Eastern Bloc, highlighting the central role of hierarchical administration in guiding the allocation of resources in these economic systems as opposed to planned coordination. Planned economies are usually associated with Soviet - type central planning, which involves centralized state planning and administrative decision making. In command economies, important allocation decisions are made by government authorities and are imposed by law. Planned economies are held in contrast to unplanned economies, specifically market economies, where production, distribution, pricing and investment decisions are made by autonomous firms operating in markets. Market economies that use indicative planning are sometimes referred to as `` planned market economies ''. The traditional conception of socialism involves the integration of socially - owned economic enterprises via some form of planning with direct calculation substituting factor markets. As such the concept of a planned economy is often associated with socialism and socialist planning. 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. Contents 1 Planned versus command economies 2 Advantages of economic planning 3 Disadvantages of economic planning 3.1 Inefficient resource distribution : surplus and shortage 3.2 Suppression of economic democracy and self - management 3.3 Economic instability 4 Relationship with socialism 5 Computational economic planning 6 Fictional portrayals of planned economies 7 See also 8 Notes 9 Further reading 10 External links Planned versus command economies Main article : Economic planning Planned economies are held in contrast with command economies, where 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. Whereas most of the 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 understand / respond to local conditions and changes in the economy, and therefore would be unable to effectively coordinate all economic activity. Although planned economies have historically been associated with Marxist - Leninist states and the Soviet economic model, some argue 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. The possibility of a digital planned economy was explored by Chile with the creation of Project Cybersyn and Alexander Kharkevich head of the Department of technical physics in Kiev in 1962. Another key difference 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, 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. Another example of this is the utilization of dirigisme, or government direction of the economy through non coercive means, both of which were practiced in France and Great Britain after the Second World War. Swedish public housing models were planned by the government in a similar fashion as urban planning in a project called Million Programme. Advantages of economic planning The government can harness land, labours, and capital to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. In international comparisons, state - socialist nations compared favorably with capitalist nations in health indicators such as infant mortality and life expectancy, although the statistics concerning infant mortality are self - reported and based on varying standards. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing. This is what happened in the Soviet Union during the 1930s when the government forced the share of GNP dedicated to private consumption from eighty percent to fifty percent. As a result, the Soviet Union experienced massive growth in heavy industry, with a concurrent massive contraction of its agricultural sector, in both relative and absolute terms. Disadvantages of economic planning Inefficient resource distribution : surplus and shortage Critics of planned economies argue that planners can not detect consumer preferences, shortages, and surpluses with sufficient accuracy and therefore can not efficiently co-ordinate production ( in a market economy, a free price system is intended to serve this purpose ). This difficulty was notably written about by economists Ludwig von Mises and Friedrich Hayek, who referred to subtly distinct aspects of the problem as the `` economic calculation problem '' and `` local knowledge problem '' respectively. These opponents of central planning argue that the only way to satisfy individuals who have a constantly changing hierarchy of needs, and are the only ones to possess their particular individual 's circumstances, is by allowing those with the most knowledge of their needs to have it in their power to use their resources in a competing marketplace to meet the needs of the most consumers, most efficiently. This phenomenon is recognized as spontaneous order. Additionally, misallocation of resources would naturally ensue by redirecting capital away from individuals with direct knowledge and circumventing it into markets where a coercive monopoly influences behavior, ignoring market signals. According to Tibor R. Machan, `` Without a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals. '' Suppression of economic democracy and self - management Economist Robin Hahnel notes that, even if central planning overcame its inherent inhibitions of incentives and innovation, it would nevertheless be unable to maximize economic democracy and self - management, which he believes are concepts that are more intellectually coherent, consistent and just than mainstream notions of economic freedom. Says Hahnel, `` Combined with a more democratic political system, and redone to closer approximate a best case version, centrally planned economies no doubt would have performed better. But they could never have delivered economic self - management, they would always have been slow to innovate as apathy and frustration took their inevitable toll, and they would always have been susceptible to growing inequities and inefficiencies as the effects of differential economic power grew. Under central planning neither planners, managers, nor workers had incentives to promote the social economic interest. Nor did impeding markets for final goods to the planning system enfranchise consumers in meaningful ways. But central planning would have been incompatible with economic democracy even if it had overcome its information and incentive liabilities. And the truth is that it survived as long as it did only because it was propped up by unprecedented totalitarian political power. '' Economic instability Studies of Eastern European planned economies in the 1950s and 1960s by both American and Eastern European economists found that, contrary to the expectations of both groups, they showed greater fluctuations in output than market economies during the same period. Relationship with socialism Main article : Socialism While socialism is not equivalent to economic planning or to the concept of a planned economy, an influential conception of socialism involves the replacement of capital markets with some form of economic planning in order to achieve ex-ante coordination of the economy. The goal of such an economic system would be to achieve conscious control over the economy by the population, specifically, so that the use of the surplus product is controlled by the producers. The specific forms of planning proposed for socialism and their feasibility are subjects of the socialist calculation debate. Computational economic planning In their book Towards a New Socialism ( 1993 ) the computer scientist Paul Cockshott from the University of Glasgow and the economist Allin Cottrell from the Wake Forest University shows in detail how a democratically planned economy built on modern computer technology is possible and drives the thesis that it would be both economically more stable than the free market economies and also morally desirable. In 1971, when the development of computer technology was still its early stages, the democratically elected socialist Allende regime launched the Project Cybersyn to install a telex machine in every corporation and organisation in the economy for the communication of economic data between the corporations and the government. The data was also fed into a computer simulated economy for forecasting. A control room was built for realtime observation and management of the overall economy. The project was initially successful but in 1973 it was violently ended by a CIA sponsored military coup led by Pinochet. He installed himself as a dictator and replaced the socialist economy with a neoliberal free market economy inspired and advised by Milton Friedman. Fictional portrayals of planned economies The 1888 novel Looking Backward by Edward Bellamy depicts a fictional planned economy in a United States around the year 2000 which has become a socialist utopia. The World State in Aldous Huxley 's Brave New World and Airstrip One in George Orwell 's Nineteen Eighty - Four are both fictional examples of command economies, albeit with diametrically 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. Airstrip One is organised by the euphemistically named Ministry of Plenty. Other literary portrayals of planned economies were Yevgeny Zamyatin 's We, which was an influence on Orwell 's work. Like Nineteen Eighty Four, Ayn Rand 's dystopian story Anthem was also an artistic portrayal of a command economy that was influenced by We. The difference is that it was a primitivist planned economy, as opposed to the advanced technology of We or Brave New World. See also Calculation in kind Communist state Communist economy Dirigisme Distributed economy Economic democracy Economic equilibrium Economic calculation problem Economic planning Horizontalidad Inclusive democracy Indicative planning Industrial democracy Input - output model Material balance planning Market economy Marxism - Leninism Mixed economy Participatory economics Production for use Project Cybersyn Public ownership Peer - to - Peer economy Socialist calculation debate Socialist economy State capitalism Technocracy Self - managed economy Case studies ( Soviet - type economies ) Analysis of Soviet - type economic planning Five - Year Plans in the Soviet Union Five - year plans of China OGAS, a plan for creating a computer network to supervise the Soviet economy Project Cybersyn, a project for a computer network controlling the economy of Chile under Salvador Allende. Eastern Bloc economies Case studies ( Mixed - market economies ) Indicative planning in France First Malaysia Plan Five - year plans of Argentina Five - Year Plans of South Korea Economy of Singapore Economy of India Notes Jump up ^ Alec Nove ( 1987 ), `` Planned Economy, '' The New Palgrave : A Dictionary of Economics, v. 3, p. 879. Jump up ^ Devine, Pat ( July 26, 2010 ). Democracy and Economic Planning. Polity. ISBN 978 - 0745634791. Jump up ^ Wilhelm, John Howard ( 1985 ). `` The Soviet Union Has an Administered, Not a Planned, Economy ''. Soviet Studies. 37 ( 1 ) : 118 -- 30. doi : 10.1080 / 09668138508411571. Jump up ^ Ellman, Michael ( 2007 ). `` The Rise and Fall of Socialist Planning ''. In Estrin, Saul ; Kołodko, Grzegorz W. ; Uvalić, Milica. Transition and Beyond : Essays in Honour of Mario Nuti. New York : Palgrave Macmillan. p. 22. ISBN 0 - 230 - 54697 - 8. 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... Jump up ^ Zimbalist, Sherman and Brown, Andrew, Howard J. and Stuart ( October 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 ). Jump up ^ Rosser, Mariana V. ; Rosser, J Barkley ( 23 July 2003 ). Comparative Economics in a Transforming World Economy. MIT Press. p. 7. ISBN 978 - 0 - 262 - 18234 - 8. In a command economy the most important allocation decisions are made by government authorities and are imposed by law. Jump up ^ Prychito, David L. ( July 31, 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. Jump up ^ Mandel, Ernest ( 1986 ). `` In Defence of Socialist Planning '' ( PDF ). New Left Review. 159 : 5 -- 37. 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. Jump up ^ Ellman, Michael ( March 31, 1989 ). Socialist Planning. Cambridge University Press. p. 327. ISBN 978 - 0521358668. ' socialist planning ', in the original sense of a national economy which replaced market relationships by direct calculation and direct product exchange, has nowhere been established... Jump up ^ Allin Cottrell & W. Paul Cockshott, Towards a new socialism ( Nottingham, England : Spokesman, 1993 ). Retrieved : 28 February 2017. Jump up ^ planned economy. Dictionary.com Unabridged ( v 1.1 ). Random House, Inc. ( accessed : May 11, 2008 ). Jump up ^ command economy. In Merriam - Webster Online Dictionary ( 2008 ) ( accessed May 11, 2008 ). Jump up ^ Trotsky, Leon. Writings 1932 -- 33. p. 96. Jump up ^ Ellman, Michael ( 2007 ). `` The Rise and Fall of Socialist Planning ''. In Estrin, Saul ; Kołodko, Grzegorz W. ; Uvalić, Milica. Transition and Beyond : Essays in Honour of Mario Nuti. New York : Palgrave Macmillan. p. 22. ISBN 0 - 230 - 54697 - 8. Realization of these facts led in the 1970s and 1980s to the development of new terms to describe what had previously been ( and still were in United Nations publications ) referred to as the ' centrally planned economies '. 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... Jump up ^ http://csef.ru/en/politica-i-geopolitica/223/mashiny-kommunizma-pochemu-v-sssr-tak-i-ne-sozdali-svoj-internet-6983 Jump up ^ Kharkevich, Aleksandr Aleksandrovich ( 1973 ). Theory of information. The identification of the images. Selected works in three volumes. Volume 3. Information and technology : Moscow : Publishing House `` Nauka '', 1973. - Academy of Sciences of the USSR. Institute of information transmission problems. p. 524. Jump up ^ Michael Ellman ( 2014 ). Socialist Planning. Cambridge University Press. ISBN 1107427320 p. 372. Jump up ^ Kennedy, Paul ( 1987 ). The Rise and Fall of the Great Powers. New York : Random House. pp. 322 -- 3. ISBN 0 - 394 - 54674 - 1. Jump up ^ Machan, R. Tibor ( 2002 ). `` Some Skeptical Reflections on Research and Development ''. Liberty and Research and Development : Science Funding in a Free Society ( PDF ). Hoover Press. ISBN 0 - 8179 - 2942 - 8. ^ Jump up to : Hahnel, Robin ( 2002 ). The ABC 's of Political Economy. London : Pluto Press. p. 262. ISBN 0 - 7453 - 1858 - 4. Jump up ^ Zielinski, J.G. ( 1973 ). Economic Reforms in Polish Industry. New York : Oxford University Press. ISBN 0 - 19 - 215323 - 4. Jump up ^ Feinstein, C.H. ( 1975 ). Socialism, Capitalism and Economic Growth : Essays Presented to Maurice Dobb. Cambridge University Press. p. 174. ISBN 0 - 521 - 29007 - 4. We have presented the view that planning and market mechanisms are instruments that can be used both in socialist and non-socialist societies... It was important to explode the primitive identification of central planning and socialism and to stress the instrumental character of planning. Further reading Michael Ellman ( 2014 ). Socialist Planning. Cambridge University Press ; 3 edition. ISBN 1107427320 Gregory Grossman ( 1987 ) : `` Command economy, '' The New Palgrave : A Dictionary of Economics, v. 1, pp. 494 -- 95. Carl Landauer ( 1947 ) : Theory of National Economic Planning. University of California Press. Berkeley and Los Angeles, Second edition. Alec Nove ( 1987 ) : `` Planned economy, '' The New Palgrave : A Dictionary of Economics, v. 3, pp. 879 -- 85. Myant, Martin ; Drahokoupil, Jan ( 2010 ), Transition Economies : Political Economy in Russia, Eastern Europe, and Central Asia, Wiley - Blackwell, ISBN 978 - 0 - 470 - 59619 - 7 Cox, Robin 2005, `` The Economic Calculation controversy : unravelling of a myth '' ( 1 ) ' Devine, Pat. ' Democracy and Economic Planning. Polity. 2010. ISBN 978 - 0745634791 Mandel, Ernest. In Defence of Socialist Planning. New Left Review, Issue 159. 1986. 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Question: who makes key decisions in a centrally planned economy
Answer: government authorities