Indicative planning is a form of

economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...

implemented by a

state State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...

in an effort to solve the problem of imperfect information in market economies by coordination of private and public investment through forecasts and output targets. The resulting plans aim to supply economically valuable information as a public good that the market by itself cannot disseminate, or where forward markets are nonexistent. However, indicative planning takes only endogenous market uncertainty into account, plans the economy accordingly, and does not look into exogenous uncertainty like technology, foreign trade, etc. Indicative plans serve to complement and enhance the market, as opposed to replace the market mechanism, hence they are adopted in market-based and mixed economies and were most widely practiced in France and Japan before the 1980s. When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes o affect the economy but does not compel". Indicative planning is contrasted with ''directive'' or ''mandatory planning'', where a state (or other economic unit) sets quotas and mandatory output requirements. Planning by inducement is often referred to as indicative planning.

In practice

Indicative planning is coordinated information that guides the choices of separate state and private entities in a

market economy A market economy is an economic system in which the decisions regarding investment, production, and distribution to the consumers are guided by the price signals created by the forces of supply and demand. The major characteristic of a mark ...

mixed economy A mixed economy is an economic system that includes both elements associated with capitalism, such as private businesses, and with socialism, such as nationalized government services. More specifically, a mixed economy may be variously de ...

India

Eighth Five Year Plan (1992 - 1997) adopted Indicative Planning in India. Eighth Five Year Plan (1992 - 1997) was for managing the transition from a centrally planned economy to market led economy through indicative planning.

France

Indicative planning originated in

France France, officially the French Republic, is a country located primarily in Western Europe. Overseas France, Its overseas regions and territories include French Guiana in South America, Saint Pierre and Miquelon in the Atlantic Ocean#North Atlan ...

after the

Second World War World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...

Charles de Gaulle Charles André Joseph Marie de Gaulle (22 November 18909 November 1970) was a French general and statesman who led the Free France, Free French Forces against Nazi Germany in World War II and chaired the Provisional Government of the French Re ...

in 1946 to strengthen the French economy and offset the demands of socialists and Communists calling for socialization of the means of production and/or Stalinist command planning. Indicative planning was one aspect of

dirigisme Dirigisme or dirigism () is an economic doctrine in which the state plays a strong directive (policies) role, contrary to a merely regulatory or non-interventionist role, over a market economy. As an economic doctrine, dirigisme is the opposite ...

that lasted until the 1980s. Indicative planning was carried out by the General Planning Commission. The underlying concept behind indicative planning is the early identification of oversupply, bottlenecks and shortages so that state investment behavior can be modified in a timely fashion to reduce the incidence of market disequilibrium, with the goal being a concerted economy. Policy tools used included export subsidies, R&D funding, tax breaks, preferential lending by state-owned banks, and a relaxed

antitrust Competition law is the field of law that promotes or seeks to maintain market competition by regulating anti-competitive conduct by companies. Competition law is implemented through public and private enforcement. It is also known as antitrust l ...

policy.

People's Republic of China

Since the 1978 economic reforms in China, the state reduced its role to directing economic activity rather than managing it through directive plans. By the early 21st century, the Chinese government had limited the role of directive mandatory planning to goods of national importance and large-scale construction, while increasing the scope of indicative planning and market forces in all other sectors of the economy. The current Chinese

socialist market economy The socialist market economy (SME) is the economic system and model of economic development employed in the China, People's Republic of China. The system is a market economy with the predominance of public ownership and State-owned enterpr ...

is largely based on market forces for consumer goods and indicative planning for heavy industry in the

public sector The public sector, also called the state sector, is the part of the economy composed of both public services and public enterprises. Public sectors include the public goods and governmental services such as the military, law enforcement, pu ...

Union of Soviet Socialist Republics

The

Soviet Union The Union of Soviet Socialist Republics. (USSR), commonly known as the Soviet Union, was a List of former transcontinental countries#Since 1700, transcontinental country that spanned much of Eurasia from 1922 until Dissolution of the Soviet ...

utilized indicative plans for its state-run economy up until 1928, before they were integrated into mandatory planning under the Supreme Council of the National Economy and later by the Gosplan. Alexei Kosygin's 1965 Soviet economic reform tried to introduce some sort of indicative planning in the USSR.

Japan

The Japanese government practiced indicative planning through the Japanese Economic Planning Agency.

National economic planning

The term ''National Economic Planning'' is associated with government's effort to coordinate the working of both the public sector and the

private sector The private sector is the part of the economy which is owned by private groups, usually as a means of establishment for profit or non profit, rather than being owned by the government. Employment The private sector employs most of the workfo ...

through a structured mechanism. Although, during the 20th century, the term was more associated with the communist and eastern economies, through the 1970s, theorists and practitioners documented the growth of this practice amongst western economies to

https://www.nytimes.com/1975/12/21/archives/points-of-view-national-economic-planning-pro-and-con.htm

http://www.ucpress.edu/books/op/RILLL3.php] . In the latter part of the 20th century and till date, economists have demanded that underdeveloped and developing countries — especially in continents like Africa — should embrace National Economic Planning to a large exten

https://web.archive.org/web/20131004234244/http://news.myjoyonline.com/news/200907/33224.asp]. Famous proponents and practitioners of National Economic Planning have been Nobel Prize–winning Russian politician Leonid Kantorovich, John M Hartwic

Carl Landauer (who, in 1947, wrote one of the first western books on the subject, titled Theory of National Economic Planning), American Republican politician

Alf Landon Alfred Mossman Landon (September 9, 1887October 12, 1987) was an American oilman and politician who served as the 26th governor of Kansas from 1933 to 1937. A member of the Republican Party, he was the party's nominee in the 1936 presidential ...

, the Russian born Canadian politician David Lewis, Chinese politician Zhang Baoshun and German sociologist Adolph Lowe.

References

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Literature

*Carl Landauer: ''Planwirtschaft und Verkehrswirtschaft'' Duncker & Humblodt, München und Leipzig 1931. *Carl Landauer: ''Theory of national economic planning'', Berkeley, California: University of California Press, 1944 first edition; 1947 2. edition. Economic systems Economic planning French economic policy Mixed economies fr:Planification en France