Planned Economy
Is a centrally planned economy desirable?
Wiki User
2014-05-17 14:23:06
As this is a question looking for an opinion, you may have
dissenting answers.
Answer 1 - No
The main problem with a centrally planned economy, and from
which nearly all problems with the system derive, is the inability
for forecasters to properly predict what future consumption will
be. This inevitably leads to shortages, when a good is more
desirable than previously estimated, and overages, when a good is
less desirable than previously estimated. These shortages and
overages lead to price instability, which harms businesses and
consumers who can no longer adequately budget for their needs in a
climate of price jumps and falls. Correspondingly, people buy less
than they may want in order to only get what they absolutely need
and save for a rainy day. This leads to a contracted economy
overall. A free-market economy is able to circumvent the problem of
shortages and overages more effectively since businesses are able
to increase or decrease production with realtime market
information.
It should not surprise anyone that every centrally planned
economy has resulted in poor growth and dissatisfaction of the
population.
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