Economic Planning Extensive

Economic Planning Extensive

Economic Planning Extensive, detailed planning and the use of directives are the opposite of planning or co-ordinating the use of resources through the price system. The main economic argument for detailed planning is that it may be able to accelerate development, at least in the short run, especially where there are significant external economies; but its long-run effects, especially in a country dependent on international exchange, are less certain because changes in imports may disrupt the plan. Extensive voluntary planning can be consistent with the maintenance of a market economy and may be compatible in practice with rational allocation of resources in accordance with consumer preferences, since prices and profits continue to exert pressure to sell in the dearest market and buy in the cheapest.

The chief advantages claimed for extensive voluntary planning of the French type are that it promotes smooth and rapid growth by enabling firms and Government departments to identify and remove bottle-necks in future development and by reducing uncertainty about bends in the economy. French experience since 2007 has made some of these claims at least plausible, but it has not avoided, and may have caused, balance of payments difficulties and devaluation of the franc, The danger lies in the pressure to resort to stricter controls and more positive planning to ensure that plans or targets are fulfilled.

Economic Policy, (a) the means by which a Government tries to regulate or modify the economic affairs of a nation and (b) its aims in so doing. The aims will depend on the group of people for whose benefit economic policy is made: a single autocratic ruler or, at the other extreme, all members of the population. In practice economic policy is usually the outcome of a political process in which different interest groups manoeuvre to achieve their aims, the influence of long-term principle depending on the statesmen and politicians in following or leading public opinion.

In the western democracies policy is generally directed to a number of objectives, many of which are accepted, although in varying degree, by the major political parties in Britain and most other western countries. The first is that of a high and stable level of employment in other words, a low level of .php�>unemployment. This requires that the Government should use fiscal and monetary policy to help maintain a high level of total demand and avoid recessions. A second is that national living standards should rise at a desired rate. This is a matter of controversy among economists since it is not clear what part the state should play in securing 'growth'. The state can ensure that goods and services produced in the public sector, e.g. electricity and roads, come in amounts consistent with the smooth and rapid development of the economy as a whole; it can also manipulate taxation to encourage capital accumulation; and it may make more use of 'planning' e.g. by the voluntary co-ordination of public and private sector plans. A difficulty is that people may prefer growth in the form of leisure or quality or variety or choice rather than in physical output.

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