Decentralization (Civ4)/Civilopedia

Decentralization describes an economy in which the central government doesn't attempt to manage every aspect of a nation's production. The government doesn't set quotas, doesn't determine exactly what the nation's farms, factories, theaters and schools will output. Each farmer determines what his or her farm will produce; each factory owner decides what to build, whether to modernize or not, and so forth.
This kind of a totally freewheeling economy may seriously increase a nation's productivity. However, it may also lead to disaster - if all of the farmers decide to produce cotton then the nation's people will be very hungry - well-dressed, perhaps, but still very hungry.