PLAN ECONOMY Meaning and
Definition
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A planned economy, also referred to as a command economy or centrally planned economy, is a socioeconomic system in which the government or a central authority exercises significant control over economic activities, production, distribution, and allocation of resources within a nation. In a planned economy, the central authority typically formulates and implements long-term economic plans to guide the allocation of resources and achieve specific economic goals.
Under a planned economy, decisions regarding production levels, distribution channels, prices, and investments are predominantly determined by the central authority rather than market forces. The government usually owns and operates key industries and sectors such as transportation, utilities, and manufacturing, or exerts strict control over private enterprises through regulations and policies. The mechanism of resource allocation is often based on centralized economic planning, with the government setting targets and directives pertaining to production quotas, employment levels, and economic priorities.
The primary objective of a planned economy is to achieve societal goals, often focusing on equitable distribution of resources, social welfare, and collective needs over individual desires. Proponents argue that it can help reduce income inequality, eliminate exploitation, and promote social stability. However, critics argue that the lack of market mechanisms may lead to inefficiency, resource misallocation, a stifling of innovation, and potential infringements on individual freedoms.
Historically, planned economies have been associated with various political systems, including socialism and communism. Notable examples include the former Soviet Union, China's Great Leap Forward, and the Cuban economic model. In recent decades, many countries that had previously implemented planned economies have transitioned toward market-oriented systems, embracing elements of free-market capitalism.
Etymology of PLAN ECONOMY
The term "planned economy" has its origins in the early 20th century and emerged in the context of economic theories and practices that advocate for central planning and control of economic activities by the state or government. The etymology of the term itself can be broken down as follows:
1. Plan: The word "plan" comes from the Latin word "plannus", meaning "flat" or "even". It later evolved to mean a detailed proposal or method of achieving a particular goal or objective. In the context of economics, a plan refers to a comprehensive blueprint that outlines the objectives, strategies, and tactics for managing an economy.
2. Economy: The term "economy" originates from the Greek word "oikonomia", which means "management of a household". It refers to the system or method of managing resources, production, distribution, and consumption of goods and services within a society or country.
