Professional Documents
Culture Documents
What distinguishes a centrally planned economy from a market economy is that the production and
distribution responsibilities and resources are 100% controlled by the government or state. Even
though there may be businesses which control the transaction process, the CEOs of those companies
have a role to play in the governing of society too. These companies are the only ones that are
permitted to undertake the provision of services or production of goods.
1. The government makes the economic decisions in addition to controlling all aspects of
production.
2. The state also decides how all resources are used or distributed.
3. The government determines the final price for all goods and services.
4. The state is in a position where it must make these decisions for society to function.
The reason why most governments shy away from a system that is a complete centrally planned
economy is that the system does not take the will of the people or their needs into account. It will
always make decisions based on what is good for the government instead of what the overall society
requires. Most systems are not a complete free market economy either, instead choosing to combine
the two elements into something that offers public service coordination and pricing protections.
These are the advantages and disadvantages of a centrally planned economy to consider.
That’s not to say innovation cannot occur in such a system. The state is consistently working to make
improvements in the production and distribution cycles to reduce costs. You just won’t have multiple
firms working on the same research simultaneously.
7. Each person receives the same chance to pursue their goals or dreams.
The idea of a centrally planned economy is to eliminate the decision-making processes for the
average person over employment, goods, and housing. Most systems even provide households with a
residence in this economy as partial compensation for their work. You may not have any choice with
regards to where you get to live, but it is also a cost that doesn’t come out of your paycheck. There are
zero inherent household benefits that can give one group a beginning advantage over someone else.
The idea is that the way you get ahead in this system is that you use your own gifts and talents to the
betterment of the nation.
8. If you want an education in a centrally planned economy, then you get one.
The government requires workers with specific skills in a centrally planned economy, so it works hard
to ensure people receive the schooling necessary to become productive within this system. There may
be restrictions on the subject choices which are available in some years, as well as limitations on your
schedule since you may be asked to work as well. If you want to receive an advanced degree, this
economy is one of the better ways to make it happen. Your education is a priority if you make it one.
What sets a centrally planned economy apart from the other options that are available for production
and distribution is that the government needs to make all of the decisions. It is a system which makes
the assumption that the needs of the nation are not being met by market forces. The state then takes
over all areas of decision-making within the economy to provide what it feels are the essential
products and services that make life possible.
The pros and cons of a centrally planned economy show us that even though the government makes
the economic decisions, it may not be a positive choice. You have no choice in what goods are
produced, or how the production process will occur. There are more employment options, but there
are also fewer choices available for individual careers. It is a system which promotes equality by
providing the lowest-quality items to everyone while hoarding resources for itself.