Indicative planning
Encyclopedia
Indicative planning is a form of central economic planning implemented by a state
in an effort to solve the problem of imperfect information in economies
and thus increase economic performance. When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes [to affect the economy], but does not compel." Indicative planning is contrasted with directive or mandatory planning, where a state (or other economic unit) sets quotas and mandatory output requirements.
or mixed economy
.
after the Second World War and was carried out by the Commission General du Plan. The underlying concept behind indicative planning is the early identification of oversupply, bottlenecks and shortages so that state investment behavior can be modified in a timely fashion to reduce the incidence of market disequilibrium, with the goal being a concerted economy. Indicative planning was one aspect of dirigisme
.
is largely based on market forces for consumer goods and indicative planning for heavy industry in the public sector.
utilized indicative plans for its state-run economy up until 1928, before they were integrated into mandatory planning under the Supreme Council of the National Economy and later by the Gosplan
. Alexei Kosygin's 1965 Soviet economic reform
tried to introduce some sort of indicative planning in the USSR.
State (polity)
A state is an organized political community, living under a government. States may be sovereign and may enjoy a monopoly on the legal initiation of force and are not dependent on, or subject to any other power or state. Many states are federated states which participate in a federal union...
in an effort to solve the problem of imperfect information in economies
Economy
An economy consists of the economic system of a country or other area; the labor, capital and land resources; and the manufacturing, trade, distribution, and consumption of goods and services of that area...
and thus increase economic performance. When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes [to affect the economy], but does not compel." Indicative planning is contrasted with directive or mandatory planning, where a state (or other economic unit) sets quotas and mandatory output requirements.
In Practice
Indicative planning is coordinated information that guides the choices of separate state and private entities in a market economyMarket economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...
or mixed economy
Mixed economy
Mixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
.
France
This method of economic planning originated in FranceFrance
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
after the Second World War and was carried out by the Commission General du Plan. The underlying concept behind indicative planning is the early identification of oversupply, bottlenecks and shortages so that state investment behavior can be modified in a timely fashion to reduce the incidence of market disequilibrium, with the goal being a concerted economy. Indicative planning was one aspect of dirigisme
Dirigisme
Dirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
.
People's Republic of China
Since the 1978 economic reforms in China, the state reduced its role to directing economic activity rather than managing it through directive plans. By the early 21st century, the Chinese government had limited the role of directive mandatory planning to goods of national importance and large-scale construction, while increasing the scope of indicative planning and market forces in all other sectors of the economy. The current Chinese Socialist market economySocialist market economy
The socialist market economy or socialist market economy with Chinese characteristics is the official term used to refer to the economic system of the People's Republic of China after the reforms of Deng Xiaoping. It is also referred to as socialism with Chinese characteristics...
is largely based on market forces for consumer goods and indicative planning for heavy industry in the public sector.
Union of Soviet Socialist Republics
The Soviet UnionSoviet Union
The Soviet Union , officially the Union of Soviet Socialist Republics , was a constitutionally socialist state that existed in Eurasia between 1922 and 1991....
utilized indicative plans for its state-run economy up until 1928, before they were integrated into mandatory planning under the Supreme Council of the National Economy and later by the Gosplan
Gosplan
Gosplan or State Planning Committee was the committee responsible for economic planning in the Soviet Union. The word "Gosplan" is an abbreviation for Gosudarstvenniy Komitet po Planirovaniyu...
. Alexei Kosygin's 1965 Soviet economic reform
1965 Soviet economic reform
The 1965 Soviet economic reform, widely referred to simply as the Kosygin reform or Liberman reform, was a reform of economic management and planning, carried out between 1965 and 1971...
tried to introduce some sort of indicative planning in the USSR.
Japan
The Japanese government practiced indicative planning through the Japanese Economic Planning Agency.See also
- Mixed EconomyMixed economyMixed economy is an economic system in which both the state and private sector direct the economy, reflecting characteristics of both market economies and planned economies. Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety...
- Planned EconomyPlanned economyA planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency...
- DirigismeDirigismeDirigisme is an economy in which the government exerts strong directive influence. While the term has occasionally been applied to centrally planned economies, where the state effectively controls both production and allocation of resources , it originally had neither of these meanings when...
- Socialist economicsSocialist economicsSocialist economics are the economic theories and practices of hypothetical and existing socialist economic systems.A socialist economy is based on public ownership or independent cooperative ownership of the means of production, wherein production is carried out to directly produce use-value,...
- Economic planningEconomic planningEconomic planning refers to any directing or planning of economic activity outside the mechanisisms of the market, in an attempt to achieve specific economic or social outcomes. Planning is an economic mechanism for resource allocation and decision-making in contrast with the market mechanism...
- New Economic PolicyNew Economic PolicyThe New Economic Policy was an economic policy proposed by Vladimir Lenin, who called it state capitalism. Allowing some private ventures, the NEP allowed small animal businesses or smoke shops, for instance, to reopen for private profit while the state continued to control banks, foreign trade,...