What is the planned economy?

The planned economy is an economic system in which economic decisions related to the allocation of resources, production, investment and prices are under the control of government or other authoritarian authority. In the 20th century, it was believed that the centrally planned economy would do a better job than an unplanned economy to solve the needs of people without undergoing these needs insecurity and the business cycle of free market economy. The planned economy is characterized by government control over production means, although the actual ownership is private. On the other hand, in the comic book economy, a coercive type of planned economy, the means of production are almost exclusively owned by the state. Therefore, most of the planned economies generally existed only where the form of the government of oligarchy is non -stiptic, such as the former Soviet Union and in India before 1991. China, another major dictatorship, had the economy command until 1978, when it began to allow private ownership of small enterprises with a certain level of autonomy at ROassessment.

The planned economy has several advantages, among them the ability of the state is to store stability on sometimes free free markets. In such an economy, production concerns are alleviated by pressure to earn revenue and profits to continue their operations. They can therefore maintain employed workforce and provide the market for raw materials they consume in their production.

Another advantage of the centrally planned economy is the ability to ensure the production of "social status" - goods and services that are considered necessary, even if it is not very profitable. This could include low -income housing and "Orphan" Drugs. Central planning attorneys claim that in the free market economy such goods would not receive priority until a greater profit could be achieved, usually at the expense of consumer.

The planned economies are impermeable for market forces and trade cycles, making it easier to achieve the main goals. For exampleInsufficiently developed nations may require the level of investment in modernization and industrialization that would not be maintained in the free market economy.

There are many disadvantages of planned national economies. It is almost impossible to plan everything, so when something goes wrong that it has not taken into account, the whole system will fail. Historically planned economies do not take into account effectively machine or equipment failures, and are therefore generally characterized by a chronic lack of spare parts. The planned economies do not make details well.

Another main disadvantage of the planned economy is the stall of planners to predict consumer behavior. Economic planning is carried out with the aim of achieving some macroeconomic or social goals, but it cannot guarantee that consumers will respond as expected. Basically, not all consumers have fully committed themselves to the goals and goals of the government.

While the planned economies are impermeable, at least theoretically, for business cycles and pressures on VOThe liner market was not very successful in supporting long -term economic growth and consumer satisfaction. The large nations, which used economic planning in the 20th century, have evolved into economies that allow a significantly greater level of involvement in economic decisions by economics other than the government. Those nations that still use economic planning are generally small and fighting.

Although the planned economies were not very successful, no major nation has a completely free market. Instead, it esamates the system of governmental influence of the economy, sometimes called indicative planning or a mixed economy system. These systems are characterized by the use of government influence, tax policy, grants and subsidies that affect economic decisions, but generally not forced. In addition, all governments use a more or less complex system of regulations to manage the behavior of different market components, although they do not control the allocation of resources. This means that the government does not have to dictate car production or prices,But it will dictate safety standards.

While all governments commonly seek to influence their economies for many reasons, these attempts were most successful when they left the final decision to individual economic actors. The larger planned economies deposited by authoritarian governments were sometimes successful in the short -term horizon in achieving economic stability, but in TH not produced for a long time.