plaanimajandus

Planimajandus, or a planned economy, is an economic system in which a central authority plans and directs economic activity. The state typically owns the means of production, and a central plan determines what to produce, how much to produce, and how resources are allocated, rather than relying on market prices.

Key instruments include formal five-year or longer plans, state ministries or agencies that set production quotas, and price controls. Allocation is guided by the plan, with shortages and surpluses addressed by adjustments in the plan rather than by market signals. In many cases, rationing and centralized budgeting are used to achieve social or strategic objectives.

Historically, planned economies were central to the policies of the Soviet Union and its allies and satellites in Eastern Europe during much of the 20th century. Maoist China, Cuba, and North Korea also pursued central planning. Through the late 20th century, many countries shifted toward market-oriented reforms or mixed economies, combining planning with market mechanisms.

Advantages often claimed for planned economies include coordinated investment in large-scale projects, potential for rapid development, and reduced inequality. Critics point to inefficiency, an inability to reflect consumer preferences, information problems, shortages or surpluses, and weak incentives for innovation. In practice, most economies today are mixed, with planning used for long-term development goals while markets allocate most goods and services.