A Model of Soviet-Type Economic Planning

Each year, planning agencies in the Soviet Union construct an annual eco-nomic plan for the calendar year that fol-lows. The annual plan is an important element in the Soviet schema for achieving long-term economic growth. Goals of less detailed long-range plans must be con-sidered in the design of the annual plan. Furthermore, the plan is supposed to ex-pose and remedy weak links in the eco-nomic structure. But the most important and obvious purpose of the annual plan is to ensure that the economy will function in a reasonable way from day to day.1 The material supply plan is a major component of the Soviet-type annual plan. It specifies aggregate output targets and other production indices from which out-put targets and certain production indices for individual productive units are derived. The traditional procedure for constructing the material supply plan is very compli-cated and involves a large planning bu-reaucracy. In fact, it is difficult to deter-mine from the descriptive literature how rational the planning procedure is, or even how different elements of the procedure fit together.2 In this paper, an attempt is made to establish a theoretical under-pinning for this traditional Soviet-type planning procedure.3 In particular, we try to analyze how, in theory, a planning pro-cedure of this type can produce a consistent plan, i.e., a plan in which the supply and demand for each commodity is balanced.4 In order to simplify our task, we shall not consider the Soviet planning system it-self. Rather, we shall concentrate our analytical efforts on a more transparent, though not dissimilar, planning system-namely, that of the Autonomous Soviet Republic of Morozhenoe. The planning procedures of this republic oblige us by in-corporating only the most basic elements of traditional Soviet-type systems