A planned economy is an economic system in which decisions about the production, allocation and consumption of goods and services are planned ahead of time, usually in a centralized fashion, though some proposed systems favour decentralized planning. [1] [2] [3] Anglo-Saxon capitalism (so called because it is largely practiced in English speaking countries such as Australia, the UK and the United States) is a capitalist macroeconomic model in which levels of regulation and taxes are low, and the quality of state services and social indicators are weak. ... Capitalism has been defined in various, but similar, ways by different theorists. ... Dual economy is the existence of two separate economic systems within one region; common in the less developed countries, where one system is geared to local needs and another to the global export market. ... A gift economy is an economic system in which the prevalent mode of exchange is for goods and services to be given without explicit agreement upon a quid pro quo, or the concept of a favor for a favor in the Latin language. ... In anthropology, the hunter-gatherer way of life is that led by certain societies of the Neolithic Era based on the exploitation of wild plants and animals. ... Information economy is a loosely defined term to characterize an economy with increased role of informational activities and information industry. ... A mixed economy is an economy that contains both private and public, or state owned (or controlled) enterprises. ... Mutualism is a libertarian socialist economic theory or system based on the labor theory of value which states that equal amounts of labor should receive equal pay. ... The term, originated by the Organization for Economic Cooperation and Development (OECD), describes nations of the Third World that have enjoyed rapid economic growth and can be described as middle-income countries. ... An open economy is an economy in which people, including businesses, can trade in goods and services with other people and businesses in the international community at large. ... A palace economy is a system of economic organisation in which wealth flows out from a central source (the palace), eventually reaching the common people, who have no other source of income. ... This article is in need of attention. ... Socialism is a political philosophy advocating an economic system in which the means of production are owned and controlled collectively. ... A transition economy is an economy which is changing from a planned economy to a free market. ... The underground economy consists of all trade that occurs without detection by government so that commerce and income are not taxed. ...

Planned economies implemented by the way of authority, such as the economy of the Soviet Union, have become widely known as command economies. Although most economies today are market economies or mixed economies, planned economies exist in some countries such as Cuba and North Korea. A planned economy is an economic system in which economic decisions are made by centralized planners, who determine what sorts of goods and services to produce, and how they are to be priced and allocated. ... A market economy (aka free market economy and free enterprise economy) is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. ... A mixed economy is an economy that contains both private and publically, or state owned (or controlled) enterprises. ...

Support for centrally planned economies

Supporters of planned economies cast them as a practical measure to ensure the production of necessary goods—one which does not rely on the vagaries of free markets. A free market is an idealized market, where all economic decisions and actions by individuals regarding transfer of money, goods, and services are voluntary, and are therefore devoid of coercion and theft (some definitions of coercion are inclusive of theft). Colloquially and loosely, a free market economy is an economy...

• The government can harness land, labor, and capital to serve the economic objectives of the state (which, in turn, may be decided by the people through a democratic process). Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. 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.
• A planned economy can maximize the continuous utilization of all available resources. This means that planned economies do not suffer from a business cycle. Under a planned economy, neither unemployment nor idle production facilities should exist beyond minimal levels, and the economy should develop in a stable manner, unimpeded by inflation or recession.
• A planned economy can serve social rather than individual ends: under such a system, rewards, whether wages or perquisites, are to be distributed according to the social value of the service performed. A planned economy eliminates the dependence of production on individual profit motives, which may not in themselves provide for all society's needs.
• While a market economy maximises wealth by evolution, a planned economy favours design. While evolution tends to lead to a local maximum in aggregate wealth, design is in theory capable of achieving a global maximum. For example, a planned city can be designed for efficient transport, while organically grown cities tend to suffer from traffic congestion. In practice, however, efficient designs have rarely been achieved on a large scale, since the real economy is complex and is full of unknowns.

Taken as a whole, a centrally planned economy would attempt to substitute a number of firms with a single firm for an entire economy. As such, the stability of a planned economy has implications with the Theory of the firm. After all, most corporations are essentially 'centrally planned economies', aside from some token intra-corporate pricing (not to mention that the politics in some corporations resemble that of the Soviet Politburo). That is, corporations are essentially miniature centrally planned economies and seem to do just fine in a free market. As pointed out by Kenneth Arrow and others, the existence of firms in free markets shows that there is a need for firms in free markets; opponents of planned economies would simply argue that there is no need for a sole firm for the entire economy. Democracy (from Greek δημοκρατία (demokratia), δημος (demos) the common people + κρατειν (kratein) to rule + the suffix ία (ia), literally the common people rule): Democracy may be used either narrowly to describe a nation-state (government) or more broadly to describe a free society. ... The business cycle or economic cycle refers to the ups and downs seen somewhat simultaneously in most parts of an economy. ... A speculative phylogenetic tree of all living things, based on rRNA gene data, showing the separation of the three domains, bacteria, archaea and eukaryotes. ... Usually considered in the context of the applied arts, engineering, architecture, and other such creative endeavours, design is used as both a noun and a verb. ... local optimum is a term in Applied mathematics and Computer Science. ... Polynomial of degree 4, on the right one finds a local optimum, on the left is the global optimum. ... A New town or planned community or planned city is a city, town, or community that was designed from scratch, and grew up more or less following the plan. ... The theory of the firm consists of a number of economic theories which describe the nature of the firm (company or corporation), including its behaviour and its relationship with the market. ... Kenneth Arrow Kenneth Joseph Arrow (born August 23, 1921) is an American economist, winner of the Bank of Sweden Prize in Economic Sciences in 1972. ...

Objections to centrally planned economies

Critics of command economy argue that planners cannot detect demand with sufficient accuracy (in a market economy, a free price system signals serve this purpose). For example, during certain periods in the history of the Soviet Union, shortages were so common that one could wait hours in a queue to buy basic consumer products such as shoes or bread. These shortages were due in part to the central planners deciding, for example, that making tractors was more important than making shoes at that time, or because the commands were not given to supply the shoe factory with the right amount of leather, or because the central planners had not given the shoe factories the incentive to produce the required quantity of shoes of the required quality. This difficulty was first noted by economist Ludwig von Mises, who called it the "economic calculation problem". Economist János Kornai developed this into a shortage economy theory. (advocates could claim that shortages where not primarly caused by lack of supply, but hording by consumers afraid of future price changes, this was especially the case in the late Soviet Union) A free price system (informally called the price system) is an economic mechanism that guides production and distribution of scarce resources by transmitting information on preferences between consumers and producers. ... Ludwig von Mises Ludwig Heinrich Edler von Mises (September 29, 1881 – October 10, 1973) was a notable economist and a major influence on the modern libertarian movement. ... The economic calculation problem is a criticism of socialist economics. ... János Kornai, (1928-), born in Budapest, Hungary, is an economist noted for his criticism of the command economies of Eastern European communist states. ... Polish meat shop in the 1980s. ...

Critics also argue that the claimed advantages of the latter are in fact achievable by state intervention within the framework of market economy as well. In particular, it is possible to create unprofitable but socially useful goods within the context of a market economy. For example, one could produce a new drug by having the government collect taxes and then spend the money for the social good. It is also claimed that market economies allow societies to evaluate the cost of social goods and choose rationally between different alternatives.

Critics also point out that certain types of command economies may require a state which intervenes highly in people's personal lives. For example, if the state directs all employment then one's career options may be more limited. If goods are allocated by the state rather than by a market economy, citizens cannot, for example, move to another location without state permission because they would not be able to acquire food or housing in the new location, since those were not preplanned for (however, advocates of planned economy may point out that a market economy does not guarantee the existence of food and housing at the new location either).

Planned economies and socialism

Main article: Socialist economics To meet Wikipedias quality standards, this article or section may require cleanup. ...

In the 20th century, most planned economies were implemented by states that called themselves socialist. Also, the greatest support for planned economics comes from socialist authors. For these reasons, the notion of a planned economy is often directly associated with socialism. However, they do not entirely overlap. There are branches of socialism such as libertarian socialism, that reject a centralized state, and some of these tendencies reject economic planning as well. Socialism is a political philosophy advocating an economic system in which the means of production are owned and controlled collectively. ... Libertarian socialism is any one of a group of political philosophies dedicated to opposing coercive forms of authority and social hierarchy, in particular the institutions of capitalism and the State. ...

Furthermore, planned economies are not unique to socialist states. Socialism is concerned above all with achieving some degree of equality of wealth between members of society, but a planned economy, as such, does not necessarily imply an egalitarian distribution of wealth. Some authors have argued that elements of centralized economic planning exist in various modern non-socialist systems, such as the mixed economies of liberal democracies (widely seen as being capitalist countries) and the economies of fascist nations. Pre-modern economies (those existing before the industrial revolution) are more difficult to analyze by today's standards, but a number of them, particularly those of hydraulic empires, may be seen as having been centrally planned as well. A mixed economy is an economy that contains both private and public, or state owned (or controlled) enterprises. ... This article or section does not cite its references or sources. ... To Meet Wikipedias quality standards, this article or section may require cleanup. ... A Watt steam engine in Madrid. ... A hydraulic empire (also known as a hydraulic despotism or a water monopoly empire) arises through the need for flood control and irrigation, which requires central coordination and gives rise to a specialized bureaucracy. ...

There is a Trotskyist theory of the permanent arms economy, put forward by Michael Kidron, which leads on from the contention that war and accompanying industrialisation is a continuing feature of capitalist states and that central planning and other features of the war economy are ever present. ^[1] Trotskyism is the theory of Marxism as advocated by Leon Trotsky. ... The permanent arms economy is a Marxist theory which seeks to explain the sustained economic growth which occurred in the decades following World War II, especially amongst developed countries. ... Michael Kidron Michael Kidron was a revolutionary thinker and cartographer. ... Industrialisation (sometimes industrialization in American English) or an industrial revolution (in general, with lowercase letters) is a process of social and economic change whereby a human society is transformed from a pre-industrial (an economy where the amount of capital accumulated is low) to an industrial state (see Pre-industrial... War economy is the term used to describe the contingencies undertaken by the modern state to mobilize its economy for war production. ...

Transition from a planned economy to a market economy

The shift from a command economy to a market economy has proven to be difficult; in particular, there were no theoretical guides for doing so before the 1990s. One transition from a command economy to a market economy that is widely considered to be successful is that of the People's Republic of China, in which there was a period of some years lasting roughly until the early 1990s during which both the command economy and the market economy coexisted, so that nobody would be much worse off under a mixed economy than a command economy, while some people would be much better off. Gradually, the parts of the economy under the command economy decreased until the mid-1990s when resource allocation was almost completely determined by market mechanisms.

By contrast, the Soviet Union's transition was much more problematic and its successor republics faced a sharp decline in GDP during the early 1990s. While the situation has since improved, these countries have yet to generate the high rate of sustained economic growth that China has. Or even in most cases to catch up to pre-secession levels. A successor state is a state that takes over from a previously well-established state some or all of the territory and assets. ...

Similar economic models

A palace economy may be considered as a subsistence economy augmented with elements of command economy. A palace economy is a system of economic organisation in which wealth flows out from a central source (the palace), eventually reaching the common people, who have no other source of income. ... Media:Example. ...

See also

• Economy of the Soviet Union
• Socialist economics
• Participatory economics
• Project Cybersyn
• Public ownership
• Mixed economy
• Dirigisme
• Market_economy
• Technocracy

The economy of the Soviet Union was based on a system of state ownership and administrative planning. ... To meet Wikipedias quality standards, this article or section may require cleanup. ... Participatory economics, often abbreviated parecon, is a proposed economic system that uses participatory decision making as an economic mechanism to guide the allocation of resources and consumption in a given society. ... Project Cybersyn was a Chilean attempt at real-time computer-controlled planned economy in the years 1970-1973 (during the government of president Salvador Allende). ... Public ownership (also called government ownership or state ownership) is government ownership of any asset, industry, or corporation at any level, national, regional or local (municipal). ... A mixed economy is an economy that contains both private and public, or state owned (or controlled) enterprises. ... Dirigisme (from the French) (in English also dirigism although per the OED both spellings are used) is an economic term designating an economy where the government exerts strong directive influence. ... A market economy (aka free market economy and free enterprise economy) is an economic system in which the production and distribution of goods and services takes place through the mechanism of free markets guided by a free price system rather than by the state in a planned economy. ... Technocracy can refer to: A bureaucratic technocracy, or a government run by the highly educated. ...

References

1. ^ A Permanent Arms Economy by Michael Kidron, First printed in International Socialism 1:28 (Spring 1967)

An article against "The myth of the permanent arms economy"