It was the transition to planned economies that made possible the great early civilizations, such as those of China and Egypt, in about 3000 bc Traditional economic systems had allowed for subsistence (survival and a minimal level of comfort) and stability, but they did not encourage technological or cultural advances. No one knows exactly why, how, or when planned economies began to supplant traditional economic systems. Finally, central planners determine who (a ruling party, all of society, certain classes of society, a religious group) should have access to the products and receive the benefits of the economic activity. Central planners also determine, for example, whether these and other items should be produced by hand or by machine, in what part of the country they should be produced, and how they should be transported from the place they are manufactured to the place they are purchased. This means that they determine what goods and services should be produced and made available (from airplanes to bicycles, medical care to haircuts, houses to paper clips) and in what amounts. In a planned economy central planners (rather than tradition or market forces) decide most matters of production and distribution. Prices rise or fall in proportion to supply and demand, negotiating the opposing desires of buyers and sellers.
Neither buyers nor sellers usually get their way entirely. When prices are too high, however, buyers generally demand less of any given product, and when prices are low, they generally demand more. Sellers want to supply the largest amount of their products possible at the highest prices possible. In a market system, by contrast, such forces as supply (the amount of any good or service that a seller is willing to sell over a range of prices), demand (the amount of any good or service that buyers are willing to buy over a range of prices), and prices determine the shape of the economy. This is the oldest form of economic system, and it has been by far the most common one during the course of human history. In societies based on this form of economic system, people usually hunt and gather to satisfy their needs, as their ancestors before them did, and they distribute the proceeds of their hunting and gathering according to traditional hierarchies or rules. Traditional economies are those in which production and distribution are governed by inherited ideas and attitudes. Though there have been countless different kinds of human cultures in history, there have only been three basic economic systems: traditional, planned, and market economies. A planned economy (also called a command economy) is an economic system in which a government or ruler makes most or all of the important decisions about the production and distribution of goods and services in the society.
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