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Theory of Indicative Planning

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Abstract

In Chapter 1 we took as our starting-point the general-equilibrium model of perfect competition and discussed the possibility of planning by referring to certain drawbacks of this model. Two further shortcomings or difficulties with the model were alluded to but deferred until this chapter for an adequate treatment. These are the unsatisfactory formulation of the investment decision-making process within the general-equilibrium model, resulting from the standard assumptions made about intertemporal transactions; and second, the neglect of expectations and their effects on current decisions. Thus may be summarised the theoretical focus of this chapter, which leads on to the development of a theory of indicative planning. But we should also recall the more concrete examination of French experience with indicative planning which occupied Chapter 4. Much of the theory to follow has an empirical counterpart in this experience which we shall try to make clear as the argument proceeds. Moreover, some of the theoretical arguments which have been critical of the concept of indicative planning have been at least in part based directly on the French efforts in that field (see, for example, Lutz, 1969; and Richardson, 1971).

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© Martin Cave and Paul Hare 1981

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