Economic Planning - Intra-firm and Intra-industry Planning

Intra-firm and Intra-industry Planning

Large corporations allocate resources internally among different divisions and subsidiaries through planning. Many modern firms also utilize regression analysis to measure market demand in order to adjust price and decide on the optimal quantity of output to be supplied. Planned obsolescence is often cited as a form of economic planning employed by large firms to increase demand for future products by deliberately limiting the operational lifespan of a product.

In The New Industrial State, economist John Kenneth Galbraith posited that large firms can manage prices and consumer demand, and because of increasing technological capacity, management had become increasingly specialized and bureaucratized. The internal structure of a corporation had been reorganized in what he calls a "technostructure", where specialized groups and committees are the primary decision-makers, and specialized managers, directors and financial advisers with formal bureaucratic procedures have replaced the individual entrepreneur's role. He states that both the obsolete notion of "entrepreneurial capitalism" and democratic socialism (defined as democratic management) are impossible for managing the modern industrial system.

Joseph Schumpeter, an economist associated with the Austrian school and Institutional school, argued that the changing nature of economic activity - specifically the increasing bureaucratization and specialization required in production - was the major reason capitalism would eventually evolve into socialism. The role of the businessman was increasingly bureaucratic, and specific functions within the firm required increasingly specialized knowledge, which can just as easily be supplied by the state functionaries and the state apparatus.

In the first volume of Capital, Karl Marx identified a tendency for capital to accumulate under capitalism, which contributes to increasing industrial capacity due to increasing returns to scale. Capitalism eventually socializes labor and production to a point where the traditional notion of private ownership and commodity production are insufficient for managing and further expanding the productive capabilities of society, necessitating a socialist economy of the means of production and cooperative worker control over the surplus value. Socialists see this as evidence of the increasing obsolescence and inapplicability of notions of perfect competition and as evidence of the increasingly trend toward economic planning in some form or another, the next stage of evolution being planned production on the level of the national economy.