Planned economy

A command economy or directed economy is an economic system in which the government or workers' councils manage the economy. It is an economic system in which the central government makes all decisions on the production and consumption of goods and services.

Its most extensive form is referred to as a command economy, centrally planned economy, or command and control economy. In such economies, central economic planning by the state or government is so extensive that it controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income.

The planners decide what should be produced and direct enterprises to produce those goods. Less extensive forms of planned economies include those that use indicative planning, in which the state employs influence, subsidies, grants, and taxes, but does not compel.

Planned economies are in contrast to unplanned economies, such as a market economy, where production, distribution, pricing, and investment decisions are made by the private owners of the factors of production based upon their own interests rather than upon furthering some overarching macroeconomic plan.