Editing Planned economy (section)

== Central planning ==
=== Advantages ===
Supporters of a planned economy argue that the government can harness [[land (economics)|land]], [[Work (human activity)|labor]], and [[capital (economics)|capital]] to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. In international comparisons, supporters of a planned economy have said that state-socialist nations have compared favorably with capitalist nations in health indicators such as infant mortality and life expectancy. However, according to [[Michael Ellman]], the reality of this, at least regarding infant mortality, varies depending on whether official Soviet or [[World Health Organization|WHO]] definitions are used.<ref>{{cite book|last=Ellman|first=Michael|title=Socialist Planning|date=2014|publisher=Cambridge University Press|isbn=978-1107427327|page=372|url=https://books.google.com/books?id=4L2ZBAAAQBAJ&pg=PA372|quote=For the USSR, the official Soviet statistics of infant mortality give too favourable a picture. There are two reasons for this. First, the USSR used a definition of 'birth' different from the WHO one (Chapter 8, pp. 321–322). The percentage increase in the infant mortality rate caused by switching from the Soviet definition to the WHO one seems to have ranged from 13 per cent in Moldova to 40 per cent in Latvia. In Poland, which has a much larger population than the two previously mentioned countries, it was about 21 per cent. Secondly, there seems to have been significant under-registration of deaths, particularly in certain regions, such as Central Asia and Azerbaijan. Estimates of 'true' infant mortality in 1987–2000 show very high increases over the official figures in Central Asia, Azerbaijan, Albania, Romania, and Bulgaria. In Russia – which was supposed to have adopted the WHO definition of 'birth' by 1993 and where under-registration is much less than in Central Asia or Azerbaijan – in 1987–2000 the estimated increase of the official figures to measure 'true' infant mortality is 26.5 percent.|access-date=2020-11-02|archive-date=2024-02-07|archive-url=https://web.archive.org/web/20240207234259/https://books.google.com/books?id=4L2ZBAAAQBAJ&pg=PA372#v=onepage&q&f=false|url-status=live}}</ref>

The state can begin building massive heavy industries 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. This is what happened in the Soviet Union during the 1930s when the government forced the share of [[gross national income]] dedicated to private consumption down from 80% to 50%. As a result of this development, the Soviet Union experienced massive growth in heavy industry, with a concurrent massive contraction of its agricultural sector due to the labor shortage.<ref>{{cite book|first=Paul|last=Kennedy|title=The Rise and Fall of the Great Powers|url=https://archive.org/details/risefallofgreatp00kenn|url-access=registration|location=New York|publisher=Random House|year=1987|isbn=0-394-54674-1|pages=[https://archive.org/details/risefallofgreatp00kenn/page/322 322–323]}}</ref>

=== Disadvantages ===
==== Economic instability ====
Studies of command economies of the [[Eastern Bloc]] in the 1950s and 1960s by both American and Eastern European economists found that contrary to the expectations of both groups they showed greater fluctuations in [[Output (economics)|output]] than market economies during the same period.<ref name="Economic Reforms in Polish Industry">{{cite book|last=Zielinski|first=J. G.|title=Economic Reforms in Polish Industry|location=New York|publisher=Oxford University Press|year=1973|isbn=0-19-215323-4}}</ref>

==== Inefficient resource distribution ====
Critics of planned economies argue that planners cannot detect consumer preferences, shortages and surpluses with sufficient accuracy and therefore cannot efficiently co-ordinate production (in a [[market economy]], a [[free price system]] is intended to serve this purpose). This difficulty was notably written about by economists [[Ludwig von Mises]] and [[Friedrich Hayek]], who referred to subtly distinct aspects of the problem as the [[economic calculation problem]] and [[local knowledge problem]], respectively.<ref name="Mises">{{cite book|title=Economic calculation in the Socialist Commonwealth|access-date=8 September 2008|last=Von Mises|first=Ludwig|author-link=Ludwig von Mises|year=1990|publisher=[[Ludwig von Mises Institute]]|url=http://library.freecapitalists.org/books/Ludwig%20von%20Mises/Economic%20Calculation%20in%20the%20Socialist%20Commonwealth.pdf|archive-url=https://web.archive.org/web/20141216200523/http://library.freecapitalists.org/books/Ludwig%20von%20Mises/Economic%20Calculation%20in%20the%20Socialist%20Commonwealth.pdf|archive-date=16 December 2014|url-status=dead}}</ref><ref name="AER519-30">Hayek, Friedrich A. (1945). "[[The Use of Knowledge in Society|The Use of Knowledge]]". ''American Economic Review''. XXXV: 4. pp. 519–530.</ref> These distinct aspects were also present in the economic thought of [[Michael Polanyi]].<ref>{{Cite journal|last=Biro|first=Gabor|date=2022|title=From Red Spirit to Underperforming Pyramids and Coercive Institutions: Michael Polanyi Against Economic Planning," History of European Ideas, 2022.|journal=History of European Ideas|volume=48|issue=6|pages=811–847|doi=10.1080/01916599.2021.2009359|s2cid=225260656|url=https://www.tandfonline.com/doi/abs/10.1080/01916599.2021.2009359?journalCode=rhei20|access-date=2022-08-16|archive-date=2022-08-16|archive-url=https://web.archive.org/web/20220816094159/https://www.tandfonline.com/doi/abs/10.1080/01916599.2021.2009359?journalCode=rhei20|url-status=live|url-access=subscription}}</ref>

Whereas the former stressed the theoretical underpinnings of a market economy to [[subjective value theory]] while attacking the [[labor theory of value]], the latter argued that the only way to satisfy individuals who have a constantly changing hierarchy of needs and are the only ones to possess their particular individual's circumstances is by allowing those with the most knowledge of their needs to have it in their power to use their resources in a competing marketplace to meet the needs of the most consumers most efficiently. This phenomenon is recognized as [[spontaneous order]]. Additionally, misallocation of resources would naturally ensue by redirecting capital away from individuals with direct knowledge and circumventing it into markets where a coercive monopoly influences behavior, ignoring market signals. According to [[Tibor Machan]], "[w]ithout a market in which allocations can be made in obedience to the law of supply and demand, it is difficult or impossible to funnel resources with respect to actual human preferences and goals".<ref name="tibor2001">{{cite book|last=Machan|first=Tibor|chapter-url=http://media.hoover.org/documents/0817929428_xi.pdf |archive-url=https://web.archive.org/web/20061031225531/http://media.hoover.org/documents/0817929428_xi.pdf |archive-date=2006-10-31 |url-status=live|title=Liberty and Research and Development: Science Funding in a Free Society|chapter=Some Skeptical Reflections on Research and Development|publisher=Hoover Press|year=2002|isbn=0-8179-2942-8}}</ref>

Historian [[Robert Vincent Daniels]] regarded the [[Stalinist]] period to represent an abrupt break with Lenin's government in terms of economic planning in which an deliberated, [[scientific socialism|scientific system]] of planning that featured former [[Menshevik]] [[economists]] at [[Gosplan]] had been replaced with a hasty version of planning with unrealistic targets, bureaucratic waste, [[bottleneck (production)|bottleneck]]s and [[shortages]]. Stalin's formulations of national plans in terms of physical quantity of output was also attributed by Daniels as a source for the stagnant levels of efficiency and quality.<ref>{{cite book |last1=Daniels |first1=Robert V. |title=The End of the Communist Revolution |date=2002 |publisher=Routledge |isbn=978-1-134-92607-7 |pages=90–92 |url=https://books.google.com/books?id=ZKeJAgAAQBAJ&dq=stalin+abortion+criminalised&pg=PA94 |language=en |access-date=2023-10-30 |archive-date=2023-11-07 |archive-url=https://web.archive.org/web/20231107190548/https://books.google.com/books?id=ZKeJAgAAQBAJ&dq=stalin+abortion+criminalised&pg=PA94 |url-status=live }}</ref>

==== Suppression of economic democracy and self-management ====
{{Main|Socialist democracy}}

Economist [[Robin Hahnel]], who supports [[participatory economics]], a form of [[socialist]] decentralized planned economy, notes that even if central planning overcame its inherent inhibitions of incentives and innovation, it would nevertheless be unable to maximize economic democracy and self-management, which he believes are concepts that are more intellectually coherent, consistent and just than mainstream notions of economic freedom.<ref name="Hahnel, Robin 2002">{{cite book|last=Hahnel|first=Robin|title=The ABC's of Political Economy|location=London|publisher=Pluto Press|year=2002|isbn=0-7453-1858-4|page=262}}</ref> Furthermore, Hahnel states:
<blockquote>Combined with a more democratic political system, and redone to closer approximate a best case version, centrally planned economies no doubt would have performed better. But they could never have delivered economic self-management, they would always have been slow to innovate as apathy and frustration took their inevitable toll, and they would always have been susceptible to growing inequities and inefficiencies as the effects of differential [[economic power]] grew. Under central planning neither planners, managers, nor workers had incentives to promote the social economic interest. Nor did impeding markets for final goods to the planning system enfranchise consumers in meaningful ways. But central planning would have been incompatible with economic democracy even if it had overcome its information and incentive liabilities. And the truth is that it survived as long as it did only because it was propped up by unprecedented totalitarian political power.<ref name="Hahnel, Robin 2002"/></blockquote>

===Command economy===
Planned economies contrast with command economies in that a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc."<ref name="reference1">[http://dictionary.reference.com/browse/planned%20economy "Planned economy"] {{Webarchive|url=https://web.archive.org/web/20070228020932/http://dictionary.reference.com/browse/planned%20economy |date=2007-02-28 }}. Dictionary.com. Unabridged (v. 1.1). Random House, Inc. Retrieved 11 May 2008).</ref> whereas a command economy necessarily has substantial public ownership of industry while also having this type of regulation.<ref name="autogenerated1">[http://www.m-w.com/dictionary/command%20economy "Command economy"] {{Webarchive|url=https://web.archive.org/web/20070124123940/http://www.m-w.com/dictionary/command%20economy |date=2007-01-24 }}. ''Merriam-Webster Online Dictionary''. Retrieved 11 May 2008.</ref> In command economies, important allocation decisions are made by government authorities and are imposed by law.<ref>{{cite book|title=Comparative Economics in a Transforming World Economy|last1=Rosser|first1=Mariana V.|last2=Rosser|first2=J. Barkley|date= 2003|publisher=MIT Press|isbn=978-0-262-18234-8|page=7|quote=In a command economy the most important allocation decisions are made by government authorities and are imposed by law.}}</ref>

This is contested by some [[Marxist]]s.<ref name=":0" /><ref>Schweickart, David; Lawler, James; Ticktin, Hillel; Ollman, Bertell (1998). "Definitions of Market and Socialism". ''Market Socialism: The Debate Among Socialists''. New York: Routledge. pp. 58–59. {{ISBN|978-0-415-91967-8}}. "For an Anti-Stalinist Marxist, socialism is defined by the degree to which the society is planned. Planning here is understood as the conscious regulation of society by the associated producers themselves. Put it differently, the control over the surplus product rests with the majority of the population through a resolutely democratic process. [...] The sale of labour power is abolished and labour necessarily becomes creative. Everyone participates in running their institutions and society as a whole. No one controls anyone else."</ref> [[Decentralized planning]] has been proposed as a basis for [[socialism]] and has been variously advocated by [[anarchists]], [[council communists]], [[libertarian Marxists]] and other [[Democratic socialism|democratic]] and [[Libertarian socialism|libertarian]] socialists who advocate a non-market form of socialism, in total rejection of the type of planning adopted in the [[economy of the Soviet Union]].<ref>Schweickart, David (2007). [http://orion.it.luc.edu/~dschwei/demsoc.htm "Democratic Socialism"]. In Anderson, Gary L.; Herr, Kathryn G., eds. ''Encyclopedia of Activism and Social Justice''. Sage Publications. p. 448. {{ISBN|978-1452265650}}. {{webarchive|url=https://web.archive.org/web/20120617235335/http://orion.it.luc.edu/~dschwei/demsoc.htm|date=17 June 2012}}. Retrieved 6 August 2020. "Virtually all socialists have distanced themselves from the economic model long synonymous with ''socialism'' (i.e., the Soviet model of a nonmarket, centrally planned economy. [...] Some have endorsed the concept of ''market socialism'', a postcapitalist economy that retains market competition but socializes the means of production and, in some versions, extends democracy to the workplace. Some hold out for a nonmarket, participatory economy. All democratic socialists agree on the need for a democratic alternative to capitalism".</ref>

Most of a command 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 [[command hierarchy|chain of command]], with little input from lower levels. Advocates of economic planning have sometimes been staunch critics of these command economies. [[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 who understand/respond to local conditions and changes in the economy. Therefore, they would be unable to effectively coordinate all economic activity.<ref name=":4">{{cite book|title=Writings 1932–33|page=96|first=Leon|last=Trotsky}}</ref>

Historians have associated planned economies with [[Marxist–Leninist state]]s and the [[Soviet-type economic planning|Soviet economic model]]. Since the 1980s, it has been contested that the Soviet economic model did not actually constitute a planned economy in that a comprehensive and binding plan did not guide production and investment.<ref>{{cite journal|last=Wilhelm|first=John Howard|year=1985|title=The Soviet Union Has an Administered, Not a Planned, Economy|journal=[[Europe-Asia Studies|Soviet Studies]]|volume=37|issue=1|pages=118–130|doi=10.1080/09668138508411571}}</ref> The further distinction of an [[administrative-command system]] emerged as a new designation in some academic circles for the economic system that existed in the former [[Soviet Union]] and [[Eastern Bloc]], highlighting the role of centralized hierarchical decision-making in the absence of popular control over the economy.<ref name="The Rise and Fall of Socialist Planning">{{cite book|last=Ellman|first=Michael|chapter=The Rise and Fall of Socialist Planning|title=Transition and Beyond: Essays in Honour of Mario Nuti|editor1-first= Saul|editor1-last=Estrin|editor2-first=Grzegorz W.|editor2-last=Kołodko|editor3-first=Milica|editor3-last=Uvalić|location= New York|publisher= Palgrave Macmillan|year=2007|isbn=978-0-230-54697-4|page=22|quote=Realization of these facts led in the 1970s and 1980s to the development of new terms to describe what had previously been (and still were in United Nations publications) referred to as the 'centrally planned economies'. In the USSR in the late 1980s the system was normally referred to as the 'administrative-command' economy. What was fundamental to this system was not the plan but the role of administrative hierarchies at all levels of decision making; the absence of control over decision making by the population [...].}}</ref> The possibility of a digital planned economy was explored in Chile between 1971 and 1973 with the development of [[Project Cybersyn]] and by [[Aleksandr Aleksandrovich Kharkevich]], head of the Department of Technical Physics in Kiev in 1962.<ref>[http://csef.ru/en/politica-i-geopolitica/223/mashiny-kommunizma-pochemu-v-sssr-tak-i-ne-sozdali-svoj-internet-6983 "Machine of communism. Why the USSR did not create the Internet"] {{Webarchive|url=https://web.archive.org/web/20220308013038/http://csef.ru/en/politica-i-geopolitica/223/mashiny-kommunizma-pochemu-v-sssr-tak-i-ne-sozdali-svoj-internet-6983 |date=2022-03-08 }}.</ref><ref>{{cite book|last1= Kharkevich|first1= Aleksandr Aleksandrovich|title=Theory of information. The identification of the images. Selected works in three volumes. Volume 3|date= 1973|publisher= Moscow: Publishing House "Nauka", 1973. – Academy of Sciences of the USSR. Institute of information transmission problems|location=Information and technology|page=524}}</ref>

While both economic planning and a planned economy can be either authoritarian or [[Economic democracy|democratic]] and [[Participatory economics|participatory]], [[democratic socialist]] critics argue that command economies under modern-day communism is highly undemocratic and totalitarian in practice.<ref>Busky, Donald F. (2000). ''Democratic Socialism: A Global Survey''. Praeger. pp. 7–8. {{ISBN|978-0275968861}}. "Sometimes simply called socialism, more often than not, the adjective ''democratic'' is added by democratic socialists to attempt to distinguish themselves from Communists who also call themselves socialists. All but communists, or more accurately, Marxist-Leninists, believe that modern-day communism is highly undemocratic and totalitarian in practice, and democratic socialists wish to emphasise by their name that they disagree strongly with the Marxist-Leninist brand of socialism."</ref><ref>Prychito, David L. (2002). ''Markets, Planning, and Democracy: Essays After the Collapse of Communism''. Edward Elgar Publishing. p. 72. {{ISBN|978-1840645194}}. "It is perhaps less clearly understood that advocates of democratic socialism (who are committed to socialism in the above sense but opposed to Stalinist-style command planning) advocate a decentralized socialism, whereby the planning process itself (the integration of all productive units into one huge organisation) would follow the workers' self-management principle."</ref> [[Indicative planning]] is a form of economic planning in market economies that directs the economy through incentive-based methods. Economic planning can be practiced in a decentralized manner through different government authorities. In some predominantly market-oriented and Western mixed economies, the state utilizes economic planning in strategic industries such as the aerospace industry. Mixed economies usually employ [[macroeconomic]] planning while micro-economic affairs are left to the market and price system.