Write short notes on Planning and coordination for special stories.
Answers
Economic planning is a mechanism for the allocation of resources between and within organizations which is held in contrast to the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a direct allocation of resources within a single or interconnected group of socially-owned organizations.
There are various forms of economic planning. The level of centralization in the decision-making depends on the specific type of planning mechanism employed. As such, one can distinguish between centralized planning and decentralized planning. An economy primarily based on central planning is referred to as a planned economy. In a centrally planned economy, the allocation of resources is determined by a comprehensive plan of production which specifies output requirements. Planning may also take the form of directive planning or indicative planning.
A distinction can be made between physical planning (as in pure socialism) and financial planning (as practiced by governments and private firms in capitalism). Physical planning involves economic planning and coordination conducted in terms of disaggregated physical units whereas financial planning involves plans formulated in terms of financial units.
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