Chapter 4: Standard Principles of Planning
4.1. Overview
This chapter will look at the reference principles that serve as the basis for the implementation of specific planning based on a sustainable planned economy. These reference principles of planning should serve as the basis for the economic techniques to be applied in developing individual economic plans.
In this regard, if we return to the three planned economy models discussed in the previous section, in the equilibrium planned economy model, the most important criterion principle in planning is the equilibrium between supply and demand. In a sense, this is the starting point of the theory of planned economy.
In a capitalist market economy, the relationship between supply and demand is subject to random and capricious transactions between parties in the market, which is permanently unstable, while there is always the risk that the market will be manipulated through tricks such as intentional price manipulation. Therefore, economic management is inherently unstable, and events such as depressions and recessions are inevitable due to the imbalance between supply and demand.
In light of these deficiencies, the planned economy is planned in advance in order to adjust the supply-demand relationship appropriately. The reference principle here is the concept of "material balance." Material balance refers to balancing the amount of production (amount of value) set as the production target and the amount of input required to achieve the target in each planning year, and is the core concept of supply and demand adjustment in a planned economy.
In fact, this balancing principle is also applied in the production planning of individual companies in a capitalist economy, but the difference is that in a planned economy, it is applied to the entire area where economic planning is implemented.
Incidentally, in the development planning economy model, the "development tempo," which measures the degree of economic development through each economic plan, was set as an additional criterion principle, while the balance of goods and services principle was used as the base principle. This is a criterion principle peculiar to the former Soviet model of planned economy, which started from a state of underdevelopment and set the supreme goal of catching up with and overtaking capitalism, but before long, expansion and reproduction became the overriding principle, rather than the material balance.
In contrast, in the environmentally planned economic model on which the sustainability planned economy, the subject of this paper, is based, "environmental balance" is added. This is the principle of adjusting the balance of goods and services according to the allowable load of the global environment, and is the very core principle that guarantees ecological sustainability.
In this sense, it is no exaggeration to say that this principle is not merely an additional principle, but a fundamental principle that should take precedence over the material balance mentioned above. On the other hand, principles such as the development tempo, which could push the environmental balance out of balance, no longer apply in an environmentally planned economic model.
By the way, in the rigorous application of these principles, whether in the material balance or the environmental balance, it is essential to construct a mathematical model. Among other things, it is the application of linear programming. In this respect, the development of supercomputers and artificial intelligence today is a tailwind for the construction of such mathematical models for planning.
On the other hand, in applying the material balance to the adjustment of supply and demand, it is necessary to introduce not only mathematical models, which may fall into desk planning without humans, but also behavioral science principles to rationally predict the economic decision-making of concrete, flesh-and-blood humans.
๐The papers published on this blog are meant to expand upon my On Communism.
