Command economies

A planned economy is a type of economic system where investment and the allocation of capital goods is determined by an economy-wide plan of production. A planned economy may be based on centralized, decentralized or participatory forms of economic planning. A command economy or administrative command economy refers to the nominally-planned economies of the former Soviet Union and Eastern Bloc to highlight the central role of hierarchical administration in guiding the allocation of resources in these economic systems, as opposed to planned coordination.

Planned economies are usually associated with Soviet-type central planning, which involves centralized state planning and administrative decision making. In command economies, important allocation decisions are made by government authorities and are imposed by law. Planned economies are held in contrast to unplanned economies, specifically market economies, where production, distribution, pricing and investment decisions are made by autonomous firms operating in markets. Market economies that use indicative planning are sometimes referred to as “planned market economies”.

The traditional conception of socialism involves the integration of socially-owned economic enterprises via some form of planning, with direct calculation substituting factor markets. As such, the concept of a planned economy is often associated with socialism and socialist planning, although such an economic system has not yet been established anywhere in the world. Some economists and computer scientists have proposed forms of socialist planning based on advances in computer science and information technology in recent decades.

Planned economies are held in contrast with command economies, where a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc." but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry. Therefore, command economies are planned economies, but not necessarily the reverse.

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