Planned economy is an economic system in which the state directs the economy. It is an economic system in which the central government controls industry such that it makes major decisions regarding the production and distribution of goods and services. Its most extensive form is referred to as a command economy, centrally planned economy, or command and control economy.

In such economies, central economic planning by the state or government controls all major sectors of the economy and formulates all decisions about the use of resources and the distribution of output. Planners decide what should be produced and direct lower-level enterprises to produce those goods in accordance with national and social objectives.

Planned economies are in contrast to unplanned economies, i.e. the market economy, where production, distribution, pricing, and investment decisions are made by the private owners of the factories of production based upon their individual interests rather than upon a macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning, 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".

A planned economy may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, the means of production are publicly owned. That is, 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.

Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating (or as in the Soviet Union, the system collapsed) and moving toward market-based economies by allowing the private sector to make the pricing, production, and distribution decisions. Although most economies today are market economies or mixed economies (which are partially planned), planned economies exist in very few countries such as Cuba, Libya, North Korea, Saudi Arabia, Belarus, and Myanmar.

Economic planning versus the command economy

Economic planning is a mechanism for resource allocation of inputs and decision-making based on direct allocation, in contrast with the market mechanism, which is based on indirect allocation. 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 rather than market transactions involving the purchasing of assets by one government agency or firm by another. Decision-making is carried out by workers and consumers on the enterprise-level.

This is contrasted with the concept of a centrally-planned, or command economy, where most of the economy is planned by a central government authority, and organized along a top-down administration where decisions regarding investment, production output requirements are decided upon by planners from the top, or near the top, of the chain of command. Advocates of economic planning have sometimes been staunch critics of command economies and centralized planning. For example, Leon Trotsky believed that central planners, 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 would be unable to effectively coordinate all economic activity.

Another key difference is that command economies are strictly authoritarian in nature, whereas some forms of economic planning, such as indicative planning, direct the economy through incentive-based methods. Economic planning can be practiced in a decentralized manner through different government authorities. For example, in some predominately market-oriented and mixed economies, the state utilizes economic planning in strategic industries such as the aerospace industry.

Another example of this is the utilization of dirigisme, both of which were practiced in France and Great Britain after the Second World War. Swedish public housing models were planned by the government in a similar fashion as urban planning. Mixed economies usually employ macroeconomic planning, while micro-economic affairs are left to the market and price system.

The People's Republic of China currently has a socialist market economy in place. Within this system, macroeconomic plans are used as a general guidelines and as government goals for the national economy, but the majority of state-owned enterprises are subject to market forces. This is heavily contrasted to the command economy model of the former Soviet Union.

Decentrally Planned economy

A decentrally planned economy is an economy where members of a society, acting with equal economic power, democratically plan economic activity.

The 1970 Chilean computer controlled planned economy cybersyn was pioneered by Salvador Allende's socialist government, in an attempt to move towards decentralised planning with the experimental cyberfolk component.

During the Spanish Revolution some Anarchist areas were run under decentralised planning following the principles laid out by Diego Abad de Santillan in the book After the Revolution

De-centralised planning has been a feature in socialist and anarchist economics. Variations of decentralized planning include participatory economics, economic democracy and industrial democracy, and have been promoted by various political groups, most notably libertarian socialists, Trotskyists, Anarchists and democratic socialists.

Planned economies and socialism

In the 20th century, most planned economies were implemented by states that called themselves socialist. Also, the greatest support for planned production comes from socialist authors. For these reasons, the notion of a planned economy is often directly associated with socialism. However, they do not entirely overlap. There are branches of socialism such as libertarian socialism and market socialism, that reject economic planning as a substitute for market allocation. All of these tendencies usually reject centralized ownership, referring to such as ''state socialism'' or ''state capitalism'', and instead advocate decentralized ownership based on worker cooperatives and worker self-management.

While many socialist currents advocated economic planning as an eventual substitute for the market for factors of production, socialists define economic planning as being based on worker-self management, with production being carried out to directly satisfy human needs, and contrast this with the concept of a ''command economy'' of the Soviet Union, which they characterize as being based on a top-down bureaucratic administration of the economy in a similar fashion to a capitalist firm. The Command economy is distinguished from economic planning, and different theories for classifying the socioeconomic system of the Soviet Union exist; most notably a command economy is associated with Bureaucratic collectivism, State capitalism or State socialism.

Furthermore, planned economies are not unique to Communist states. There is a Trotskyist theory of permanent arms economy, put forward by Michael Kidron, which leads on from the contention that war and accompanying industrialisation is a continuing feature of capitalist states and that central planning and other features of the war economy are ever present.

Transition from a planned economy to a market economy

The shift from a command economy to a market economy has proven to be difficult; in particular, there were no theoretical guides for doing so before the 1990s. One transition from a command economy to a market economy that many consider successful is that of the People's Republic of China, in which there was a period of some years lasting roughly until the early 1990s during which both the command economy and the market economy coexisted, so that nobody would be much worse off under a mixed economy than a command economy, while some people would be much better off. This 'success' was coupled with a massive disparity between rich and poor and a disturbing new level of corruption, and 90% of Chinese billionaires are related to members of the Communist Party. Gradually, the parts of the economy under the command economy decreased until the mid-1990s when resource allocation was almost completely determined by market mechanisms.

By contrast, the Soviet Union's transition was much more problematic and its successor republics faced a sharp decline in GDP during the early 1990s. One of the suggested causes is that under Soviet planning, price ceilings created major problems (shortages, queuing for bread, households hoarding money) which made the transition to an unplanned economy less easy. While the transition to a market economy proved difficult, many of the post-Soviet states have been experiencing strong, resource-based economic growth in recent years, though the levels vary substantially. However, a majority of the former Soviet Republics have not yet reached pre-collapse levels of economic development.

Still, most of the economic hardship that struck many of the former East Bloc countries and the post-Soviet states comes from the program of shock therapy. The idea behind this program is to convert from a centrally planned economy to a market economy in a short space of time. This means mass-scale privatization, budget cuts and liberalization of economy and finance regulations. This shock therapy program was implemented in several former communist states like Poland and Russia.

Iraq, after the fall of Saddam Hussein following the 2003 invasion of Iraq, is currently experiencing the transition from a command economy under Hussein to a free market economy. Iran is currently privatizing companies.

Advantages of economic planning

Stability

Long-term infrastructure investment can be made without fear of a market downturn (or loss of confidence) leading to abandonment of a project. This is especially important where returns are risky (''e.g.'' fusion reactor technology) or where the return is diffuse (''e.g.'' immunization programs or public education).

Meeting collective objectives

Planned economies may be intended to serve collective rather than individual needs: under such a system, rewards, whether wages or perquisites, are to be distributed according to the value that the state ascribes to the service performed. A planned economy eliminates the individual profit motives as the driving force of production and places it in the hands of the state planners to determine what is the appropriate production of different sets of goods.

The government can harness land, labor, and 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. 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. This is what happened in the Soviet Union during the 1930s when the government forced the share of GNP dedicated to private consumption from 80 percent to 50.0 percent. As a result, the Soviet Union experienced massive growth in heavy industry.

Comparison with capitalist corporations

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. As pointed out by Kenneth Arrow and others, the existence of firms in free markets shows that there is a need for firms in free markets; opponents of planned economies would simply argue that there is no need for a sole firm for the entire economy. Anarchist theorists like Kevin Carson however point to the numerous ways in which government intervention in the market magnify economies of scale, offsetting the natural inefficiencies of centrally planned economies by means of privileges and historical subsidies granted by force, and argues that in a truly free market corporations wouldn't exist.

Advantages over market economies

An advantage of a planned economy, one which was among the most important for socialist economists of the early 20th century, is that it is not subject to major pitfalls of market economies and marked-oriented mixed economies. A planned economy, in theory, does not suffer from business cycles; it does not experience crises of overproduction such as the one that was believed to have contributed to the Great Depression. From the modern perspective, it does not result in asset bubbles – massive misallocations of resources such as the dot-com bubble of the late 1990s or the housing bubble of mid-2000s.

The other aspect is that a centrally planned economy can provide public goods which would not have been available at all, or might require explicit government provision, in a market economy, resulting in a mixed economy. In a mixed economy, the government would have to achieve this goal through taxation or inflation. In a planned economy, state planners would allocate state resources toward public goods and state projects.

Disadvantages of economic planning

Inefficient resource distribution: surplus and shortage

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). For example, even though the Soviet Union had its own passenger car manufacturing industry going back to the 1940's, it was not possible for a Soviet citizen to walk into a store and buy a car as the entire output of all car manufacturing plants was allocated for years in advance. From the modern viewpoint, such a shortage indicates a mismatch between supply and demand, suggesting that planners have misjudged the demand for the product, the equilibrium price, or both.

This difficulty was first noted by economist Ludwig von Mises, who called it the "economic calculation problem". Economist János Kornai developed this into a shortage economy theory (advocates could claim that shortages were not primarily caused by lack of supply).

A problem of surpluses exists. Surpluses indicate a waste of labour and materials that could have been applied to more pressing needs of society. Critics of central planning say that a market economy prevents long-term surpluses because the operation of supply and demand causes the price to sink when supply begins exceeding demand, indicating to producers to stop production or face losses. This frees resources to be applied to satisfy short-term shortages of other commodities, as determined by their rising prices as demand begins exceeding supply.

It is argued that this "invisible hand" prevents long-term shortages and surpluses and allows maximum efficiency in satisfying the wants of consumers. Critics argue that since in a planned economy prices are not allowed to float freely, there is no accurate mechanism to determine what is being produced in unnecessarily large amounts and what is being produced in insufficient amounts. They argue that efficiency is best achieved through a market economy where individual producers each make their own production decisions based on their own profit motive.

These opponents of central planning argue that the only way to determine what society actually wants is by allowing private enterprise to use their resources in competing to meet the needs of consumers, rather those taking resources away and allowing government to direct investment without responding to market signals. According to Tibor R. Machan, "Without 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."

If the government in question is democratic, democratically-determined social priorities may be considered legitimate social objectives in which the government is justified in intervening in the economy. It must be noted that to date, most if not all countries employing command economies have been dictatorships or oligarchies few or none were democracies. Many democratic nations, however, have a mixed economy, where the government intervenes to a certain extent and in certain aspects of the economy, although other aspects of the economy are left to the market.

Suppression of economic democracy and self-management

Central planning is also criticized by elements of the radical left. Libertarian socialist economist Robin Hahnel 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.

As Hahnel explains, "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."

Without economic democracy there can be troubles with the flow of knowledge as is shown with the initiative for backyard furnaces and other efforts in the Great Leap Forward.

See also

Case studies:

Economy of the Soviet Union

Five-Year Plans in the Soviet Union

Five-year plans of Argentina

Great Leap Forward (China)

Economy of India

Project Cybersyn (Chile)

Eastern Bloc economies

Economy of Saudi Arabia

Further reading

Gregory Grossman (1987): "Command economy," ''The New Palgrave: A Dictionary of Economics'', v. 1, pp. 494–95.

Carl Landauer (1947): ''Theory of National Economic Planning''. University of California Press. Berkeley and Los Angeles, Second edition.

Alec Nove (1987): "Planned economy," ''The New Palgrave: A Dictionary of Economics'', v. 3, pp. 879–85.

Notes

External links

An article against "The myth of the permanent arms economy"

The Stalin Model for the Control and Coordination of Enterprises in a Socialist Economy

Category:Communism Category:Economies Category:Economic systems Soviet Union Category:Economic planning

ar:اقتصاد شمولي bg:Планова икономика ca:Economia planificada cs:Plánovaná ekonomika da:Planøkonomi de:Zentralverwaltungswirtschaft et:Plaanimajandus es:Economía planificada fr:Économie planifiée hr:Plansko gospodarstvo it:Economia pianificata he:כלכלה מתוכננת ka:გეგმიური ეკონომიკა kk:Жоспарлы экономика lt:Planinė ekonomika hu:Tervgazdálkodás arz:اقتصاد شمولى nl:Centraal geleide economie ja:計画経済 no:Planøkonomi nn:Planøkonomi pl:Gospodarka planowa pt:Economia planificada ru:Плановое хозяйство si:සැලසුම්ගත ආර්ථික ක්‍රමය simple:Command economy sk:Príkazová ekonomika fi:Suunnitelmatalous sv:Planekonomi ta:திட்டமிட்ட பொருளாதாரம் tr:Planlı ekonomi uk:Командна економіка vi:Kinh tế kế hoạch zh:計劃經濟

Coordinates	23°40′04″N46°27′39″N
name	Yu Dafu
birth date	December 07, 1896
birth place	Fuyang, Zhejiang, China
death date	September 17, 1945
occupation	Short Story writer and Poet
website	}}

Yu Dafu () (December 7, 1896—September 17, 1945). Born in Fuyang, Hangzhou, Zhejiang, was a modern Chinese short story writer and poet.

Early years

Yu Dafu's father died at when he was only three, leaving the family poverty-stricken and destitute. He received a number of scholarships through the Chinese government and went on to receive a traditional Chinese education in Hangzhou. Chronologically he studied in Jiangxing-Fu Middle School (before he came to Hangzhou), Hangzhou-Fu Middle School, Yuying Academy (育英学堂, formerly of Zhejiang University).

In 1912, he entered Hangchow University (later its major part merged into Zhejiang University) preparatory through examination. He was there only for a short period before he was expelled for participation in a student strike.

He then moved to Japan, where he studied economics at the Tokyo Imperial University between 1913 and 1922, where he met other Chinese intellectuals (namely, Guo Moruo, Zhang Ziping and Tian Han). Together, in 1921 they founded the ''Chuangzao she'' 創造社 ("Creation Society"), which promoted vernacular and modern literature. One of his earlier works ''Chenlun'' 沉淪, also his most famous, published in Japan in 1921. The work had gained immense popularity in China, shocking the world of Chinese literature with its frank dealing with sex, as well as grievances directed at the incompetence of Chinese government at the time.

In 1922, he returned to China as a literary celebrity and worked as the editor of ''Creation Quarterly'', editing journals and writing short stories. In 1923, after an attack of tuberculosis, Yu Dafu directed his attention to the welfare of the masses.

In 1927, he worked as an editor of the ''Hongshui'' literary magazine. He later came in conflict with the Communist Party of China and fled back to Japan.

Second Sino-Japanese war

After the start of the Second Sino-Japanese war, he returned to China and worked as a writer of anti-Japanese propaganda in Hangzhou, and later in Zhejiang. From 1938 to 1942, he worked as a literary editor for the newspaper Sin Chew Jit Poh in Singapore.

In 1942 when the Imperial Japanese Army invaded Singapore, he was forced to flee to Sumatra. Known under a different identity, he settled there among other overseas Chinese and began a brewery business with the help of the locals. Later he was forced to help the Japanese military police as an interpreter when it was discovered that he was one of the few "locals" in the area who could speak Japanese.

In 1945, he was arrested by the Kempeitai when his true identity was finally discovered. It is believed that he was executed by the Japanese shortly after the surrender of Japan.

Works

''Chenlun'' 沉淪 "''Sinking''" (1921)

''Riji jiuzhong'' 日記九種 “''Nine Diaries''” (1927)

''Guoqu'' 過去 “''The Past''" (1927)

his first novel?? (1928) (moderately successful)

his second novel?? (1932)

''Chuben'' 出奔 "''Flight''" (1935)

His most popular work, breaking all Chinese sales records, was ''Jih-chi chiu-chung'' "''Nine Diaries''", which detailed his affair with the writer Wang Ying-hsin. The most critically acclaimed work is ''Kuo-ch'u'' or "''The Past''", written in 1927.

References

Encyclopædia Britannica 2005 Ultimate Reference Suite DVD, article- "Yü Ta-fu"

External links

Category:1896 births Category:1945 deaths Category:Chinese expatriates in Japan Category:Hangzhou High School alumni Category:People from Hangzhou Category:Republic of China poets Category:University of Tokyo alumni Category:Zhejiang University alumni

de:Yu Dafu es:Yu Dafu fr:Yu Dafu it:Yu Dafu no:Yu Dafu zh:郁達夫

Coordinates	23°40′04″N46°27′39″N
name	Charles Goyette
birth name	Charles Goyette
occupation	Radio host, author }}

Charles Goyette is an American talk show host and writer. He is a libertarian-conservative commentator, who is noted for his outspoken anti-war views, his opposition to the war in Iraq, and his economic commentary. He is the author of the ''New York Times'' bestselling book ''The Dollar Meltdown: Surviving the Impending Currency Crisis with Gold, Oil, and Other Unconventional Investments'', which Congressman Ron Paul calls "a must read," and investor Peter Schiff describes as "...a sensible plan to protect your wealth." He is working on his next book, ''Red and Blue and Broke All Over''.

He formerly hosted talk radio shows based in Phoenix, Arizona on KTAR, KFYI, KXXT, and KFNX. His show aired for the last time on KFNX on June 13, 2008. Goyette is perhaps most known for his dismissal from KFYI allegedly due to his anti-war views.

Select interviews of ''The Charles Goyette Show'' are archived at AntiWar Radio at AntiWar.com.

He was honored as "Best Phoenix Talk Show Host" by the Phoenix New Times in 2003.

Goyette has had years of experience as a financial professional in the commodities, securities, currency, and precious metals business. He has also been a participant in political and financial debate, appearing on Fox News, CNN, MSNBC, PBS, and CNBC.

He has completed a screenplay on the life of the famous American seer Edgar Cayce.

Some Articles by Charles Goyette

''The American Conservative'': "How to Lose Your Job in Talk Radio"

''The Future of Freedom Foundation'': "Wartime Confessions of a Talk-Radio Heretic"

''LewRockwell.com'': "Winnie the Pooh and the Blustery Election," "But Soft!," and "Parallel Universes"

''AntiWar.com'': "Lebanon and Goyette's Second Law"

''CNBC.com'': "Gold - The Canary in the Coal Mine," "The Dollar Meltdown: The New Greek Tragedy?," and "China Dumping US Treasurys; What’s the Message?"

''TheStreet.com'': "They're Destroying the Dollar" and "Currency Cure: Deregulation"

''WorldNetDaily'': "1-2 punch: Bernanke and the debt ceiling"

Books

References

External links

CharlesGoyette.com - the official website of Charles Goyette.

TheDollarMeltdown.com - the official website for Goyette's book, includes book reviews and his speaking schedule.

LewRockwell.com Archive – articles by Charles Goyette .

Audio of a 2011 financial speech at the Mises Circle in Houston, Texas.

Video and audio of a 2010 financial speech at the Mises Circle in Phoenix, Arizona.

Transcription of Goyette's speech at the Ron Paul Revolution March, Capitol Hill, Washington, D.C., July 12, 2008.

Goyette on NOW with Bill Moyers on December 17, 2004.

Goyette endorsed Michael Badnarik for President in 2004. Article overview. Audio.

Transcription of a radio monologue from the Goldwater Institute, You Can Call Me Suspicious....

Category:American anti–Iraq War activists Category:American broadcast news analysts Category:American finance and investment writers Category:American political pundits Category:American libertarians Category:American talk radio hosts Category:People from Scottsdale, Arizona Category:Year of birth missing (living people) Category:Living people Category:People from Phoenix, Arizona