planned economy

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An economy in which the government takes all major production and distribution decisions. The former Soviet Union and its associated countries provided large-scale examples of planned economies. The results proved unsatisfactory, mainly for two reasons: insufficient individual incentives for productivity, and insufficient (and sometimes distorted) information for taking decisions and controlling performance. Many world economies contain elements of planned economy: in the UK, for example, the government directs several large sectors, including defence, roads, education, and health.

Subjects: Economics.

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