Centrally planned economy

A centrally planned economy is an economy which employes a centralized administrative apparatus to manage production and consumption and for economic planning. Centrally planned economies have historically been effective in making substantial improvements in the economy of countries with low economic development such as Bulgaria and Romania; however, when applied to a more advanced economy such as Hungary results were mediocre.

Central decisions based on satisfying human needs have often been less effective than profit-driven free market mechanisms in determining prices and allocations of natural resources, labor, and goods. Designing and implementing a efficient human needs-based economic system remains a largely unsolved problem for socialist theorists and economic planners.

The Soviet Union prior to World War II benefited greatly from central economic planning, but, later, in the era of stagnation prior to its breakup the Soviet economy, despite heroic efforts by central planners, often failed to produce goods that satisfied Soviet consumers or met international standards.