ⓘ Indicative planning


ⓘ Indicative planning

Indicative planning is a form of economic planning implemented by a state in an effort to solve the problem of imperfect information in market and mixed economies in order to increase economic performance. 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. When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes, but does not compel". Indicative planning is contrasted with directive or mandatory planning, where a state sets quotas and mandatory output requirements. Planning by inducement is often referred to as indicative planning.


1. In practice

Indicative planning is coordinated information that guides the choices of separate state and private entities in a market economy or mixed economy.


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


1.1. In practice Peoples 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 is largely based on market forces for consumer goods and indicative planning for heavy industry in the public sector.


1.2. In practice Union of Soviet Socialist Republics

The Soviet Union 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 Kosygins 1965 Soviet economic reform tried to introduce some sort of indicative planning in the USSR.


1.3. In practice Japan

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


2. National economic planning

The term National Economic Planning is associated with governments effort to coordinate the working of both the public sector and the private sector 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 too, Carl Landauer, American Republican politician Alf Landon, the Russian born Canadian politician David Lewis, Chinese politician Zhang Baoshun and German sociologist Adolph Lowe.


3. Literature

  • Carl Landauer: Theory of national economic planning, Berkeley, California: University of California Press, 1944 first edition; 1947 2. edition.
  • Carl Landauer: Planwirtschaft und Verkehrswirtschaft Duncker & Humblodt, Munchen und Leipzig 1931.