A centrally planned economy refers to an economic system in which the government plays a central role in the planning and control of all economic activities. In this type of economic system, decisions regarding production, distribution, and resource allocation are primarily made by a central authority, usually the government or a planning committee.
In a centrally planned economy, the government sets specific goals and objectives for the economy and develops detailed plans to achieve them. It determines what goods and services should be produced, how much should be produced, and at what price they should be sold. The government also determines the allocation of resources, including labor, capital, and land.
The motive behind a centrally planned economy is often based on the idea of achieving social goals, such as equitable distribution of wealth, elimination of poverty, and prioritizing national self-sufficiency. However, the effectiveness of a centrally planned economy is a subject of debate, as it often lacks the flexibility, adaptability, and efficiency of market-based systems.
One of the key features of a centrally planned economy is the absence of private ownership and control over the means of production. Instead, major industries and enterprises are owned and operated by the state or government, and economic decisions are based on political considerations rather than market forces.
Examples of centrally planned economies include the former Soviet Union, Cuba, and North Korea.
