A PLANNED ECONOMY

A planned economy is an economic system in which a single agency makes all decisions about the production and allocation of goods and services. The term is
used most often to refer to a centrally-planned economy (or command economy), in which the state or government controls the factors of production and makes all
decisions about their use and about the distribution of income. In a centrally-planned economy, the planners decide what should be produced and direct enterprises to produce those goods. A planned economy is usually contrasted with a market economy, where production, distribution, and pricing decisions are made by the private owners of the factors of production and influenced by market forces. A planned economy may either consist of state owned enterprises, private enterprises who are directed by the state, or a combination of both. Though planned economies are usually defined in contrast to market economies, it is not necessary for an economy to be either market-based or centrally-planned; other systems also exist. 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. Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating and moving toward market based economies by introducing market forces to determine pricing, distribution, and production. Although economies today are market economies or mixed economies, planned economies exist in some countries such as Cuba and North Korea.  While the term planned economy usually refers to centrally-planned economies, it may also be used to refer to decentralized systems of planning such as participatory economics.

 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 uncontrolled markets.The government can harness land, labor, and capital to serve the economic  objectives of the state (which, in turn, are decided by the people through  a democratic process). Consumer demand is 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.  Consumers do not need money to express their economic demands, but may do so  through democratic councils (sometimes called workers councils) to decide and implement democratic decisions about the economy.   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 favors design. While evolution tends to lead to a local maximum in aggregate wealth,  design is 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. 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 a Politburo).