Models of economic planning under uncertainty: A selective survey and appraisal

Uncertainty and risk have played significant roles in policy making, at the micro and macro levels, from formulation of policy models to their actual implementation in several countries. The impact of risk aversion on policy making has differedm however, both in magnitude and intensity. Thus, for less developed countries with large commodity exports, stabilization policies have played a role as important as those for income growth and employment; for centrally planned economies, the investment cycles leading to large-scale divergences of actual from planned targets in strategic sectors have led policy makers to consider the need for building adequate safety margins in the planning process. Finally, for developed economies, the applied theory of indicative planning and decentralization has stressed the various informational gaps and competing risks that may impede an efficient and cooperative solution between private and public sectors. A selective survey and appraisal of the planning methods as they relate to risk and uncertainty is attempted here for less developed, centrally planned, and developed market economies.