fully integrated plan can hardly be exaggerated. Moreover, the plan must
be continually modified to take account not only of current data but also
of future trends in labour and resource supplies and technological
developments. This is a notoriously difficult exercise, not least because of
the unavailability of all essential, accurate, and up-to-date information.
Until about 40 years ago, more than one-third of the world’s population
lived in countries that relied heavily on central planning. Today, after the
collapse of the Soviet Union and the rapid expansion of markets in China,
the number of such countries is small. Even in countries in which central
planning is the proclaimed system, as in Cuba and North Korea,
increasing amounts of market determination are gradually being
permitted.
Free-Market Economies
In the third type of economic system, the decisions about resource
allocation are made without any central direction. Instead, they result
from innumerable independent decisions made by individual producers
and consumers. Such a system is known as a free-market economy
more simply, a market economy. In such an economy, decisions relating to
the basic economic issues are decentralized. Despite the absence of a
central plan, these many decentralized decisions are nonetheless
coordinated. The main coordinating device is the set of market-
determined prices—which is why free-market systems are often called
price systems.