Decentralized planning (economics)

Decentralized planning (economics)

A decentralized-planned economy or decentrally-planned economy (occasionally horizontally-planned economy) is a type of economic system based on decentralized economic planning, in which decision-making is distributed amongst various economic agents or localized within production units. Decentralized planning is held in contrast to centralized planning where economic information is aggregated and used to formulate a plan for production, investment and resource allocation by a central authority.

Decentralised planning can take shape both in the context of a mixed economy as well as in a post-capitalist economic system.

Usually this implies some form of democratic decision-making within the economy or within firms, in the form of economic democracy or industrial democracy. Alternatively, computer-based or computer-managed forms of decentralized coordination between economic enterprises have been proposed by various economists and computer scientists.

Recent proposals for decentralized-economic planning have used the term participatory planning to highlight the cooperative and democratic character of this system and to contrast it with centralized planning associated with the former Soviet Union. Proponents present decentralized and participatory economic planning as an alternative to market socialism for a post-capitalist society.[1]

Decentralized-planning has been proposed as a basis for socialism, and has been advocated by democratic socialists and anarchists who advocate a non-market form of socialism while rejecting Soviet-type central planning. Some writers (e.g. Robin Cox) have argued that decentralised planning allows for a spontaneously self-regulating system of stock control (relying solely on calculation in kind), to come about and that that, in turn, decisively overcomes the objections raised by the economic calculation argument that any large scale economy must necessarily resort to a system of market prices.[2]


  • Models 1
    • Cybernetics 1.1
    • Negotiated coordination 1.2
    • Participatory Planning 1.3
  • Similar concepts in practice 2
    • Decentralised Planning in Kerala and India 2.1
    • Community Participatory Planning 2.2
  • Political advocacy 3
  • See also 4
  • Notes 5
  • Further reading 6



The use of computers to coordinate production in an optimal fashion has been proposed for socialist economies. The economist Oskar Lange argued that the computer is more efficient than the market process at solving the multitude of simultaneous equations required for allocating economic inputs efficiently (either in terms of physical quantities or monetary prices).[3]

The 1970 Chilean computer-controlled planned economy Project Cybersyn was pioneered by Salvador Allende's socialist government, in an attempt to move towards decentralised planning with the experimental Cyberfolk component.

Negotiated coordination

Economist Pat Devine has created a model of coordination called "negotiated coordination", which is based upon social ownership by those affected by the use of the assets involved, with decisions made by those at the most localised level of production.[4]

Participatory Planning

The planning structure of a decentralized planned economy is generally based on a consumers council and producer council (or jointly, a distributive cooperative), which is sometimes called a consumers' cooperative. Producers and consumers, or their representatives, negotiate the quality and quantity of what is to be produced. This structure is central to participatory economics, guild socialism, and economic theories related to anarchism.

Similar concepts in practice

Decentralised Planning in Kerala and India

Some decentralised participation in economic planning has been implemented in various regions and states in India, most notably in Kerala. Local level planning agencies assess the needs of people who are able to give their direct input through the Gram Sabhas (village-based institutions) and the planners subsequently seek to plan accordingly.

Community Participatory Planning

The United Nations has developed local projects that promote participatory planning on a community level. Members of communities take decisions regarding community development directly.

Political advocacy

Decentralised planning has been a feature of socialist and anarchist economics. Variations of decentralized planning include participatory economics, economic democracy and industrial democracy, and have been promoted by various political groups, most notably libertarian socialists, guild socialists, Marxists, anarchists and democratic socialists.

During the Spanish Revolution some areas, where anarchist and libertarian socialist influence through the CNT and UGT was extensive, particularly rural regions, were run on the basis of decentralised planning resembling the principles laid out by Diego Abad de Santillan in the book After the Revolution.[5]

See also


  1. ^
  2. ^ Schweickart, David. Democratic Socialism. Encyclopedia of Activism and Social Justice (2006): "Virtually all (democratic) socialists have distanced themselves from the economic model long synonymous with 'socialism,' i.e. the Soviet model of a non-market, centrally-planned economy...Some have endorsed the concept of 'market socialism,' a post-capitalist economy that retains market competition, but socializes the means of production, and, in some versions, extends democracy to the workplace. Some hold out for a non-market, participatory economy. All democratic socialists agree on the need for a democratic alternative to capitalism."
  3. ^
  4. ^
  5. ^

Further reading

  • Cox, Robin 2005, "The Economic Calculation controversy: unravelling of a myth" [1]'
  • Devine, Pat.'Democracy and Economic Planning. Polity. 2010. ISBN 978-0745634791
  • Mandel, Ernest. In Defence of Socialist Planning. New Left Review, Issue 159. 1986.