Planisme - Economic Planning Versus Command Economies

Economic Planning Versus Command Economies

Economic planning in general is defined as a mechanism for the allocation of inputs based on a direct allocation, held in contrast with the market mechanism, which is based on indirect 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 rather than market transactions involving the purchasing of assets by 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.

This is contrasted with the concept of a centrally planned, or a command economy, where most of the economy is planned by a central authority and organized in a top-down administrative model where decisions regarding investment, production output requirements are decided upon by planners at the top in a the chain of command, with little input from lower-levels 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 usually authoritarian in nature, whereas economic planning in general can be either participatory and democratic or authoritarian. Indicative planning is a form of 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. 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.

A planned economy may consist of state enterprises, cooperative enterprises or private enterprises or a combination of different enterprise types coordinated through some form of planning. Some make the distinction that in a "command economy", enterprises need not follow a comprehensive plan or be coordinated through planning - the dominant coordinating mechanism comes in the form of a command from higher authorities. 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.