'Planned' Economy - What's lifestyle like?

Question

I'm a bit lost when it comes to economics..

The question is -

Given the disadvantages* of having a planned economy, what would a day in the life of a person who lives under a planned economy be like?

*Disadvantages, e.g. not allowed what to do with resources readily available.

There were some ideas given: luxury goods might be hard to get, shortages, etc, and the good things like fair share.

Please help me come up with an answer to this question!

Thank you in advance (:

Answer 1

You're a bit confused, this questions calls for very different answers from a theoretical and from a practical (historical experience) point of view.

From a theoretical point of view, there's no real difference in the allocation of ressources whether the economy is centrally planned or not. Basically, if you reveal your preferences, you'll get what you need, according to what you want and to the rest of the economy's conditions (others preferences and production conditions). In technical terms, the allocation of ressources will still be optimal (only it might reflect more the society's choices in terms of equity/fairness).

It might sting your individualism, but basically you should be just as satisfied. Don't forget we're talking utility here, and unless you consider economic freedom of choice as a "fin en soi", as something that brings satisfaction in itself, it's not needed to be happy.

You'll note that the condition is "revealed preferences", which is a very strong hypothesis (but is it any stronger than Walras' general equilibrium model's hypothesis?), and leads to the main theoretical set of criticisms of centrally planned systems.

From a practical (historical?) perspective, it could be argued that there's no historical example of fully planned economy. Just as there's no example of a pure decentralized market economy, so that might be a moo-point...

If you have an opportunity to visit Berlin, a "DDR Museum" has opened 2 years ago, where it shows the former everyday life of the East Germans. I can't tell it was THAT different from the life in the West, and it seems that most people were reasonably happy (not the politilitical prisoners, I guess...).

In the same range of ideas, but very subjective, one my colleagues grew up in East Germany, and what he tells about it is that it was for most people really ok, given the fact that East Germany was "poorer" than West Germany (which doesn't only have to do with the lowest economic efficiency, the inability to benefit from the "Marshall Plan" and the huge war reparation DDR had to pay to the USSR were two things that definitely didn't help the country's development).

Hope it helped, but you should read a bit more about the topic, it's really interesting!

Answer 2

A planned economy has fewer choices, from what to wear today to what job you will get.