The term "planners' preferences" was introduced by Abram Bergson, in his study (1961) of Soviet national income, to capture the idea that the Soviet economy was ultimately directed by the top leadership of the Communist Party, rather than by consumer sovereignty as in market economies. The preferences of said leadership provide the determining orientation and socially desired objectives of a socialist economic plan designed to govern all economic activity over a defined period. As such, the term refers to the objective function used in economic analyses to "rationalize" the decisions and actions of producers and distributors of economic goods and services in a planned or Soviet-type economy. These objectives are to replace the objectives implicit in the market aggregation of consumers' and users' preferences in a properly functioning market economic system. Such preferences (tastes, needs, and desires), together with income constraints, determine the demands for goods and services. These demands, together with technological possibilities for supply, then determine the market prices offered for these goods and services, and hence underlie the market prices (key coordinating and incentive signals) in a market economy. Similarly, planners' preferences are supposed to underlie planned prices and production and distribution commands in a centrally planned economy, capturing the rationale of, and rationality behind, the comprehensive economic plan. In principle they can reflect social and collective objectives beyond any individual or organizational preference ordering, and hence capture and optimally respond to "externalities" of a social, political, or environmental nature. As such, they are sometimes used to describe the objective function in a formal welfare economic analysis of policy issues or problems. In the practice of centrally planned economies, however, they appear largely to reflect the interests and objectives of the dictator or (later) ruling elite (nomenklatura ), when not merely serving as an ex post facto rationalization for observed planning decisions.
See also: bureaucracy, economic; market socialism
Bergson, Abram. (1961). The Real National Income of Soviet Russia since 1928. Cambridge, MA: Harvard University Press.
Bergson, Abram. (1964). The Economics of Soviet Planning. Cambridge, MA: Harvard University Press.