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This is a question not easily answered and has been the source of great contention between the political parties of the eUK for as long as this reporter can remember. This reporter hopes that this article will make the debate a little easier to understand for those people who -through no fault of their own- do not comprehend the arguments for either side.

What is meant by "Planned Economy"?

A planned economy is an economic system in which the government manages the economy. In such economies, the state or government controls all major sectors of the economy and formulates all decisions about their use and about the distribution of income, much like a communist state. The planners decide what should be produced and direct enterprises to produce those goods.

What is meant by "Market Economy"?

A market economy is a system based on the division of labor in which the prices of goods and services are determined in a free price system set by supply and demand. In the real world, market economies do not exist in pure form, as societies and governments regulate them to varying degrees rather than allow self-regulation by market forces.

What are the advantages of a Planned Economy?

- Stability
A planned economy can ensure the continuous utilization of all available resources. Even though such economies are unresponsive to consumer demand, a planned economy does not suffer from a boom and bust business cycle. Under an ideally administered planned economy, neither unemployment nor idle production facilities should exist beyond minimal levels, and the economy should develop in a stable manner, unimpeded by inflation or recession.

- Meeting collective objectives by individual sacrifice

A planned economy serves collective rather than individual needs: under such a system, rewards are to be distributed according to the value that the state ascribes to the service performed. A planned economy eliminates the individual profit motives as the driving force of production and places it in the hands of the state planners to determine what the appropriate production of different sets of goods is.

- Ease of Investment in Capital

The government can harness land, labor, and capital to serve the economic objectives of the state. Consumer demand can be restrained in favor of greater capital investment for economic development in a desired pattern. The state can begin building a heavy industry at once in an underdeveloped economy without waiting years for capital to accumulate through the expansion of light industry, and without reliance on external financing.

What are the disadvantages of a Planned Economy?

- Inefficient Resource Distribution

Critics of planned economies argue that planners cannot detect consumer preferences, shortages, and surpluses with sufficient accuracy and therefore cannot efficiently co-ordinate production (in a market economy, a free price system is intended to serve this purpose). For example, during certain periods in the history of the RL Soviet Union, shortages were so common that one could wait hours in a queue to buy basic consumer products such as shoes or bread. These shortages were due in part to the central planners deciding, for example, that making tractors was more important than making shoes at that time, or because the commands were not given to supply the shoe factory with the right amount of leather, or because the central planners had not given the shoe factories the incentive to produce the required quantity of shoes of the required quality.

- Corruption

A planned economy creates social conditions favoring political corruption. Particularly, command economies have been notoriously corrupt. First, centralized decision-making predisposes planners to abuses of power. Second, the inherent inefficiency of plans drawn with insufficient information creates a need for bypassing or subverting the official decision-making process.

What are the advantages of a Market Economy?

Consumer and Producer Freedom

-Buyers are free to buy any commodity which they like and in whatever amounts. The producer can also produce whichever product they want to and also increase the capacity of any individual commodity depending upon the forces of the market. Producers are free to undertake the risks and rewards associated with increase in production. There is no state intervention in the functioning of the forces of the market.

Efficiency in the Marketplace

In a perfect world, free market leads to complete efficiency bringing about the optimal distribution of a country's resources. This would only happen in a state of equilibrium or when demand equals supply and there is a unique price for every commodity in question.

What are the disadvantages of a Market Economy?

Volatile Prices

In a practical world which is imperfect by nature, prices are never at equilibrium and very volatile depending upon the vagaries of the market forces. This generally harms people living below the poverty line or those in the low income group. It is impossible for them to pay high prices in cases of demand shortage and thus the free market model is not a viable option in developing countries which has a large number of poor.

Increased Unemployment & Poverty

Free market and liberalization with increased competition has increased unemployment levels and poverty in RL India and China with the growing divide between the rich and the poor. Growing at an average of 10% per year since 1978, increased levels of efficiency and prosperity have not percolated to the grassroots level. Developed economies such as the USA and Canada are also facing limited problems of poverty and unemployment as a result of total free market economy.

The Verdict

A pure planned economy would require the services of a number of dedicated individuals immune to the lures of corruption. They would need a deep knowledge of what makes the eUK move. They would need to understand the laws of supply and demand. A planned economy will take a lot of time and effort to run properly and for many people this would be nearly impossible. People need their sleep!

A pure market economy would require exactly the same amount of supervision - and just as many dedicated people, time and effort. The Government would need to keep a lid on those companies and assorted individuals who inevitably will seek to profit by creating ‘false’ shortages or deliberately bankrupt their competition by diverse means to create a monopoly.

It is, in my view, totally impossible to determine which of the two broad types of economic systems would work better in the eUK or in fact anywhere. Both systems can work as well as the other. A decision on which system would be best can only be decided by the People.

This is a very knotty problem. I will leave it to my intellectual superiors to decide what is best!