Planned economies are sometimes called “command economies”. These are economies with large amount of central planning and direction. The government takes all decisions, the government decides production and consumption. Command or planned economies have a number of common features in all states.
The state decides what the nation will produce. It usually plans five years ahead.
Planned economies have a number of advantages:
- everyone in society receives enough goods and services for a basic standard of living;
- the state can control the economy and divert resources to whatever it wants.
Several disadvantages also exist:
- any profits are paid to the governmen;
- planners cannot predict changers in demand.