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 economies by coordination of private and public investment through forecasts and output targets. The resulting plans aim to supply economically valuable information as a public good that the market by itself cannot disseminate, or where forward markets are nonexistent. 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. Indicative plans serve to complement and enhance the market, as opposed to replace the market mechanism, hence they are adopted in market-based and mixed economies and were most widely practiced in France and Japan before the 1980s.^[1] When utilizing indicative planning, the state employs "influence, subsidies, grants, and taxes [to affect the economy], but does not compel".^[2] Indicative planning is contrasted with directive or mandatory planning, where a state (or other economic unit) sets quotas and mandatory output requirements. Planning by inducement is often referred to as indicative planning.

^ Nielsen K. (2008) Indicative Planning. In: Palgrave Macmillan (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. "Indicative planning aims to coordinate private and public investment and output plans through forecasts or targets. Compliance is voluntary. The underlying logic is that the plan can supply economically valuable information which, as a public good, the market mechanism cannot disseminate efficiently. It may be perceived as a substitute for non-existing forward markets. However, indicative planning takes into account only endogenous market uncertainty, not exogenous uncertainty (technology, foreign trade and so on). Indicative planning has been most consistently and continuously implemented in France and Japan but has been used in many other countries, although decreasingly so since the 1970s."
^ Alec Nove (1987), "Planned Economy," The New Palgrave: A Dictionary of Economics, v. 3, p. 879.

[1] Nielsen K. (2008) Indicative Planning. In: Palgrave Macmillan (eds) The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. "Indicative planning aims to coordinate private and public investment and output plans through forecasts or targets. Compliance is voluntary. The underlying logic is that the plan can supply economically valuable information which, as a public good, the market mechanism cannot disseminate efficiently. It may be perceived as a substitute for non-existing forward markets. However, indicative planning takes into account only endogenous market uncertainty, not exogenous uncertainty (technology, foreign trade and so on). Indicative planning has been most consistently and continuously implemented in France and Japan but has been used in many other countries, although decreasingly so since the 1970s."

[2] Alec Nove (1987), "Planned Economy," The New Palgrave: A Dictionary of Economics, v. 3, p. 879.

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