Planned economy

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This article refers to an economy controlled by the state. For the proposed economic system that employes "participatory planning," see participatory economics.

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A planned economy is an economic system in which the state or government to one degree or another manages the economy.^[1] Its most extensive form is referred to as a command economy,^[2] centrally planned economy, or command and control economy^[3]) In such economies, the state or government controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income,^[4] The planners decide what should be produced and direct enterprises to produce those goods.^[5] Planned economies are in contrast to unplanned economies, i.e. a market economy, where production, distribution, and pricing decisions are made by the private owners of the factors of production based upon their own and their customers' interests rather than upon furthering some overarching macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning in which the state employs "influence, subsidies, grants, and taxes, but does not compel."^[6]

A planned economy may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, the means of production are publicly owned. That is, a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc." [1] but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry. [2] Therefore, command economies are planned economies, but not necessarily the reverse (example: Nazi Germany's private ownership yet use of the Four Year Plan could construe them as a planned economy in the wide sense, but not necessarily a command economy, while the Soviet Union with public ownership would be a command economy).

Important planned economies that existed in the past include the economy of the Soviet Union, which was for a time the world's second-largest economy, and China during its Great Leap Forward. Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating (or as in the Soviet Union, the system collapsed) and moving toward market-based economies by allowing the private sector to make the pricing, production, and distribution decisions. Although most economies today are market economies or mixed economies (which are partially planned), planned economies exist in some countries such as Cuba, North Korea, and Myanmar.^[7]

[edit] Notes

^ Alec Nove (1987), "planned economy," The New Palgrave: A Dictionary of Economics, v. 3, pp. 879-80.
^ "Command Economy." Encyclopædia Britannica. 2007. Encyclopædia Britannica Online. 11 June 2007 http://www.britannica.com/eb/article-9024945.
^ James R. Barth and Gerard Caprio, Jr. China's Changing Financial System: Can It Catch Up With, or Even Drive Growth. Networks Financial Institute. March 2007; Thomas O Bouman and David George Brand. Sustainable Forests: Global Challenges and Local Solutions. Haworth Press 1997 page 91
^ Myers, Danny. Construction Economics (2004), Spon Press (UK), p. 288
^ Ollman, Bertell. Market Socialism: The Debate Among Socialists (1997), Routledge (UK), p. 12
^ Alec Nove (1987), "planned economy," The New Palgrave: A Dictionary of Economics, v. 3, p. 879.
^ von Brabant, Jozef M. The Planned Economies and International Economic Organizations, Cambridge University Press, 1991, p. 16

[edit] References

Alec Nove (1987). "planned economy," The New Palgrave: A Dictionary of Economics, v. 3, pp. 879-85.

[edit] See also

de:Planwirtschaft et:Plaanimajandus es:Economía planificada fr:Économie planifiée it:Economia pianificata ka:გეგმიური ეკონომიკა lt:Planinė ekonomika nl:Centraal geleide economie ja:計画経済 no:Planøkonomi nn:Planøkonomi pl:Centralne planowanie pt:Economia planificada ru:Социалистическая экономика sk:Príkazová ekonomika fi:Suunnitelmatalous sv:Planekonomi vi:Kinh tế kế hoạch zh:計劃經濟

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