An automated process has detected links on this page on the local or global blacklist. Economic planning is a resource allocation mechanism that is contrasted with the market mechanism. As a coordinating mechanism for socialist economics, economic planning substitutes factor markets and is defined as a direct allocation of resources. This is contrasted with the indirect allocation mechanism of planning at different levels in the firm pdf market economy.
There are various types that economic planning procedures and forms planning can take. The level of centralization in decision-making in planning depends on the specific type of planning mechanism employed. As such, one can distinguish between centralized planning and decentralized planning. An economy primarily based on central planning is referred to as a planned economy.
In a centrally planned economy the allocation of resources is determined by a comprehensive plan of production which specifies output requirements. Planning may also take the form of directive planning or indicative planning.
Most modern economies are mixed economies incorporating various degrees of markets and planning. Physical planning involves economic planning and coordination conducted in terms of disaggregated physical units, whereas financial planning involves plans formulated in terms of financial units.
Different forms of economic planning have been featured in various models of socialism. These range from decentralized-planning systems, which are based on collective decision-making and disaggregated information, to centralized systems of planning conducted by technical experts who use aggregated information to formulate plans of production. In a fully developed socialist economy, engineers and technical specialists, overseen or appointed in a democratic manner, would coordinate the economy in terms of physical units without any need or use for financial-based calculation.
The economy of the Soviet Union never reached this stage of development, so planned its economy in financial terms throughout the duration of its existence. In the context of mainstream economics and the field of comparative economic systems, “socialist planning” usually refers to the Soviet-type command economy, regardless of whether or not this economic system actually constituted a type of socialism or state capitalism or a third, non-socialist and non-capitalist type of system. In some models of socialism, economic planning completely substitutes the market mechanism, supposedly rendering monetary relations and the price system obsolete.
In other models, planning is utilized as a complement to markets. The classical conception of socialist economic planning held by Marxists involved an economic system where goods and services were valued, demanded and produced directly for their use-value, as opposed to being produced as a by-product of the pursuit of profit by business enterprises. This idea of “production for use” is a fundamental aspect of a socialist economy. This involves social control over the allocation of the surplus product and in its most extensive theoretical form calculation-in-kind in place of financial calculation.