Chapter 1: What is a planned economy?
1.2. Planned economy and exchange economy
A market economy is an economic system that revolves around a place of exchange called the market, so a market economy is an exchange economy. In particular, in the modern exchange economy, a chain of exchange transactions is established using an intermediary product called money, so a market economy can be considered to be virtually synonymous with a monetized economy.
However, theoretically, the question of whether economic management is based on market mechanisms or economic planning and the question of whether money is the medium for exchange transactions are two different issues, and it is considered possible to achieve both a planned economy and a monetized economy. Therefore, the former Soviet-style planned economy actually operated under a monetized economy.
However, when we move beyond the conceptual level and look at it as a practical issue of economic management, a monetized economy that revolves around monetary exchange and a planned economy do not harmonize. A monetized economy is made up of a chain of monetary exchanges, which depends on supply and demand and often has speculative elements. In Marx's words, it is driven by "the undisciplined arbitrariness of commodity producers perceived by the barometer fluctuations of market prices," and is therefore uncontrollable by advance planning.
If a monetized economy is to be adapted to a planned economy, it will have to rely on the technique of price control by public institutions, especially the government. In theory, it is possible for public institutions to set appropriate prices based on prior forecasts of economic conditions and supply and demand, but in practice it is impossible to completely control speculative monetary transactions, and it is inevitable that there have been no successful examples of price control policies, including those of the former Soviet Union.
In light of this, it seems better to regard a planned economy as essentially being outside of a monetized economy. If we consider this from the perspective of money, a monetized economy that is inherently anarchic is incompatible with economic planning in the true sense of the word.
If we go back to the fundamentals of this principle, we can safely say that a planned economy is essentially a non-exchange economy. They generally do not exchange money or barter. That is pure planned economy. If even some elements of an exchange economy remain, it cannot be called a true planned economy.
Since a market is a place of exchange, a non-exchange economy is also a non-market economy, but only then does economic planning become necessary. This is because in a non-exchange, non-market economy, goods and services cannot be produced and distributed unless there is a plan that serves as a normative guideline for economic management.
In summary, a purely planned economy is first of all a non-exchange economy, and therefore also a non-monetized economy. If we look at it this way, we can understand why the Soviet-style planned economy, which operated under a monetized economy, was unable to eliminate the elements of exchange economy and ended up being a half-hearted planned economy that lacked discipline.
👉The papers published on this blog are meant to expand upon my On Communism.
