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What Is Economic Planning?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 01 October 2014
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    Conjecture Corporation
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Economic planning is a process that involves structuring the use of available resources to help bring about desired outcomes in a specific social or economic arena. Governments on different levels engage in this type of planning as a means of enhancing local or national economic conditions, sometimes by taking actions that help to slow an economic turndown and eventually pave the way for improvement to the economy. Businesses also utilize economic planning as part of the process of positioning themselves in the marketplace, and possibly having some influence in the direction that those markets move.

As the core of business economic planning is the need to address several aspects of the operation and seek to use the resources at hand to produce the desired result. This means tailoring the production process so that it functions with the highest level of efficiency, not only in terms of units produced, but also in quality and cost of those produced units. Along with production planning, companies also consider the scope of investments taken on by the business and their potential to generate additional income that can help strengthen the position of the company in the marketplace. Even something like developing the right type of distribution and publicity network to reach consumers and build a stable client base has a place in the overall central planning, resulting in an economic planning strategy that produces the desired results.

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One of the distinguishing characteristics of economic planning is that the process involves using the resources on hand to create a plan of action that ultimately benefits as many people in a given economy as possible. For example, when a government uses resources to bolster failing industries, the potential result is not simply maintaining vendors for government entities, but also preventing the loss of jobs in communities in which those businesses operate. As a result, more people remain employed and have money to spend with other businesses, ultimately benefiting citizens who are not directly connected with the government or those businesses that received aid.

The same general idea applies to economic planning as conducted by businesses. While the ultimate goal may be to strengthen the position of the business within a given industry, that process usually leads to the development of new products for consumers, possibly triggering the creation of related products that help to motivate the formation of new businesses. As a result, people who are not directly connected with the business, even as consumers, may eventually receive some benefit from the activities that took place as part of the economic planning process.

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