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A planned economy or directed economy is an economic system in which the government or workers' councils manages the economy.[1] Its most extensive form is referred to as a command economy,[2] centrally planned economy, or command and control economy[3]. In such economies, central economic planning by the state or government is so extensive that it controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income, much like a communist state.[4] The planners decide what should be produced and direct enterprises to produce those goods.[5] Planned economies are in contrast to unplanned economies, such as a market economy, where production, distribution, pricing, and investment decisions are made by the private owners of the factors of production based upon their own and their customers' interests rather than upon furthering some overarching macroeconomic plan. Less extensive forms of planned economies include those that use indicative planning, in which the state employs "influence, subsidies, grants, and taxes, but does not compel."[6] This latter is sometimes referred to as a "planned market economy".[7] A planned economy may consist of state-owned enterprises, private enterprises directed by the state, or a combination of both. Though "planned economy" and "command economy" are often used as synonyms, some make the distinction that under a command economy, the means of production are publicly owned. That is, a planned economy is "an economic system in which the government controls and regulates production, distribution, prices, etc."[8] but a command economy, while also having this type of regulation, necessarily has substantial public ownership of industry.[9] Therefore, command economies are planned economies, but not necessarily the reverse. Important planned economies that existed in the past include the economy of the Soviet Union, which was for a time the world's second-largest economy[citation needed], China during its Great Leap Forward, and India, prior to its economic reforms in 1991, Afghanistan under the Soviet occupation and under the Taliban, and Iraq under Saddam Hussein from 1979 to 2003.[10] Beginning in the 1980s and 1990s, many governments presiding over planned economies began deregulating (or as in the Soviet Union, the system collapsed) and moving toward market-based economies by allowing the private sector to make the pricing, production, and distribution decisions. Although most economies today are market economies or mixed economies (which are partially planned), planned economies exist in some countries such as Cuba, Libya, Saudi Arabia, Iran, North Korea, and Burma.[11] Supporters of planned economies cast them as a practical measure to ensure the production of necessary goods—one which does not rely on the vagaries of free markets.
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