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.

Quotes

• Aside from Yugoslavia, experiments with decentralization did not extend to planning innovation, the greatest weakness of the socialist economies. Even where markets were allowed to exert more influence over current production, the state was still responsible for planning the future. And state socialism provided only weak incentives for innovation. The Schumpeterian pressure that forced capitalist firms to innovate or die was not present in the planned economy.
  • Barry Eichengreen, The European Economy since 1945: Coordinated Capitalism and Beyond Chap. 5: “Eastern Europe and the Planned Economy”, Princeton University Press, 2008, p. 154.

• I still see Hayek as the best critic of all forms of centralized economic planning. It is to his merit to have shown scientifically that centralized planning cannot work for an economy because complete knowledge of that economy is never available centrally. As nice as it would be to have one, there is no mastermind who knows and can control everything, and there never will be. This was Hayek's scientific argument for the superiority of the market economy. A planned economy is only a viable means where there is a clear overarching goal – during wartime. A war economy is always a planned economy. Supporters of central economic dreams should therefore hear it once and for all: centralized economic planning is not suitable during peacetime.
  • René Scheu, "The role of the sceptic: A conversation with John Gray," (2013), interview of John N. Gray, Eurozine.com , "The role of the sceptic"

• As a result of the efforts of Hayek, Friedman, and the many others who share their general outlook, the idea of a centrally planned and centrally administered economy, so popular in the 1930s and early 1940s, has been discredited.
  • Irving Kristol, Neoconservatism: The Autobiography of an Idea, Chap. 9: “Capitalism, Socialism, and Nihilism”, (1995), p. 93.

• 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.
  • Tibor R. Machan, Liberty and Research and Development: Science Funding in a Free Society, Introduction chapter: “Some Skeptical Reflections on Research and Development”, Hoover Institution Press, Stanford University (2002) p. xiii [1]

• 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.
  • Robin Hahnel, The ABC's of Political Economy, (2002) London: Pluto Press. p. 262.