an economy where a central government determines both the allocation of resources and the production of goods and services
The type of economy you are referring to is known as a planned economy or a command economy. In this system, the central government controls and manages all aspects of resource allocation and production decisions.
Under a planned economy, the government formulates a central plan that outlines the production targets, resource allocation, and distribution of goods and services. This plan is typically devised by government officials or central planning authorities who decide the priorities, goals, and strategies for economic development.
The central government exercises direct control over key sectors such as agriculture, industry, and services. It determines how resources are allocated based on its assessment of societal needs, priorities, and objectives. These decisions include determining the quantity and type of goods and services produced, the amount of resources allocated to each sector, and the pricing of goods.
In a planned economy, the government often owns and operates state-owned enterprises that produce goods and services on behalf of the people. The government also sets wages and prices, regulates distribution channels, and may even control imports and exports.
Planned economies are associated with a strong interventionist role for the government in economic decision-making. The aim is often to prioritize collective welfare, reduce income inequalities, and achieve specific social or political objectives.
However, it is important to note that the success and efficiency of planned economies can vary depending on the specific implementation and management of the system. Some planned economies have experienced challenges such as inefficiencies in resource allocation, lack of innovation, and restricted individual freedoms. Others have achieved notable successes in terms of achieving rapid industrialization or meeting basic needs for their populations.