SECTION 3:CENTRALLY PLANNED

ECONOMIES

Unit 2: Economic Systems

Centrally Planned Economy

An economy that is PLANNED outby the CENTRAL GOVERNMENT

The bureaucracy decides WHAT is to be madeThe bureaucracy decides HOW things are to

be madeThe bureaucracy decides WHO gets the

things that are made

Centrally Planned Economy

An economy that is PLANNED outby the CENTRAL GOVERNMENT

The government owns Land Capital Labor (well, not owns it, but controls it!)

TWO Kinds of Centrally Planned Economies

Command Economy The government doesn’t care what the people think

There is no democracy = no vote No way for the people to control

the government The government gives COMMANDS

The people have to obey OR ELSE!

The government is AUTHORITARIAN Limits the people’s freedom Demands strict obedience

TWO Kinds of Centrally Planned Economies

Controlled Economy (Market Socialism) The government has to care about what the people

think There is a democracy = people control the government The government has to consider the people’s wants, or

the people get rid of the officials in the next election The government CONTROLS the economy through

Taxes Social service programs Owning the capital

The people control the government through elections

Disadvantages of a Centrally Planned Economy

COMMAND ECONOMY BIG TIME DisadvantagesCONTROLLED ECONOMY LESSER but still Disadvantages

Disadvantages Lacks efficiency

Bureaucracy is a slow process to deal with economics Workers have very little positive incentive to become

better, faster Lacks economic freedom

The society comes FIRST The individual comes SECOND

Disadvantages of a Centrally Planned Economy

Disadvantages Lacks economic growth

No reward for creativity and innovation Managers must follow orders from far away government

officials Lack of economic equity

History has shown that government big wigs get way more than lowly workers in command economies

Two bright spots! Can guarantee work Can jumpstart certain industries