Soviet-type economic planning

Soviet-type economic planning (STP) is the specific model of economic planning employed by Marxist-Leninist socialist states modeled on the economy of the Soviet Union. Although there was significant variation among these economies, Soviet-type planning and Soviet-type economies refers to the major structural characteristics common to these economies.

Soviet-type planning is a form of economic planning involving centralized investment decisions, administrative allocation of economic inputs, material balances to reach equilibrium between available inputs and targeted outputs, and to some extent the use of linear optimization to optimize the plans.

The major institutions of Soviet-type planning in the Soviet Union included a planning agency (Gosplan), an organization for allocating state supplies among the various organizations and enterprises in the economy (Gossnab), and enterprises which were engaged in the production and delivery of goods and services in the economy. Enterprises comprised production associations and institutes that were linked together by the plans formulated by Gosplan.

Material balance planning was the major function of Gosplan in the Soviet Union. This method of planning involved the accounting of material supplies in natural units (as opposed to monetary terms), which are used to balance the supply of available inputs with targeted outputs. Material balancing involves taking a survey of available inputs and raw materials in the economy and then using a balance-sheet to balance them with output targets specified by industry to achieve a balance between supply and demand. This balance is used to formulate a plan for the national economy.

There are two fundamental ways scholars have carried out an analysis of Soviet-type economic planning. The first involves adapting standard neoclassical economic models and theories to analyze the Soviet economic system. This paradigm stresses the importance of Pareto efficiency standard. In contrast to this approach, scholars like Pawel Dembinski argue that neo-classical tools are somewhat inappropriate for evaluating Soviet-type planning because they attempt to quantify and measure phenomena specific to capitalist-based economies. They contend that, because standard economic models rely on assumptions not fulfilled in the Soviet system (especially the assumption of economic rationality underlying decision-making), the results obtained from a neo-classical analysis will distort the actual effects of STP. These other scholars proceed along a different course, trying to engage with STP on its own terms, investigating the philosophical, historical, and political influences that gave rise to STP, and evaluating its economic successes and failures (theoretical and actual) with reference to those contexts.

...
Wikipedia