Planned Economy

Is a centrally planned economy desirable?

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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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