Under imperative
planning, economic decisions are made through a central planning authority
instead of a market system. It can also be termed as a socialist planning.
Indicative planning
is that it recognises not only consumersтАЩ sovereignty but also producersтАЩ
freedom so that the targets and priorities of the plans are achieved. It then
involves a middle path of planning mechanism and market mechanismтАФa kind of
coordination between private and public activities.
A Socialism and economic planning go hand in hand. In other words,
planning is synonymous with socialism.
In a capitalist society, plan┬нning is rather
incompatible. This is because in a capitalist society since markets work and no
one, as such, gives any direction of what to do and what not to do.
That is why capitalist
plan┬нning differs from socialist planning where government works and directs
everything.
Capitalist
planning is essentially a planning not by direction and command but by
inducements.
In
contrast, so┬нcialist planning is essentially planning by di┬нrection and
command and not by inducement and incentives to private sectors.
A
socialist planning is then called imperative planning as the central
planning authority performs all economic activities in the best interests
of the society.