Planned Economy

A planned economy is an economic system in which inputs are based on direct allocation.Economic planning may be carried out in a decentralized, distributed or centralized manner depending on the specific organization of economic institutions. An economy based on economic planning (either through the state, an association of worker cooperatives, or another economic entity that has jurisdiction over the means of production) appropriates its resources as needed, so that allocation comes in the form of internal transfers involving the purchasing of assets of one government agency or firm by another. In a traditional model of planning, decision-making would be carried out by workers and consumers on the enterprise-level.

Planned economies are held in contrast to unplanned economies, such as the market economy and proposed self-managed economy, where production, distribution, pricing, and investment decisions are made by autonomous firms based upon their individual interests rather than upon a macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning as components of a market-based or mixed economy, in which the state employs "influence, subsidies, grants, and taxes, but does not compel." This latter is sometimes referred to as a "planned market economy". In some instances, the term planned economy has been used to refer to national economic development plans and state-directed investment in market economies.

Planned economies are usually categorized as a particular variant of socialism.

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.

Whereas most of the economy is organized in a top-down administrative model by a central authority, where decisions regarding investment and production output requirements are decided upon at the top in the chain of command, with little input from lower levels. Advocates of economic planning have sometimes been staunch critics of these command economies. For example, Leon Trotsky believed that those at the top of the chain of command, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and understand/respond to local conditions and changes in the economy, and therefore would be unable to effectively coordinate all economic activity.

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