I'm going to be debating/speaking with a Libertarian on campus next week; we've tentatively set the date for Oct. 25. I want to get a few of my thoughts on the planned economy down.
We have to be very careful about what precisely we mean by a planned economy. Both planning and economics are complex topics, so a planned economy is not simply a binary. The question is not just whether to have a planned economy, but what parts of an economy should be planned; we have not only the extrema of "nothing" and "everything," but also "these parts but not those parts." Therefore, saying that some part of the economy should or shouldn't be planned doesn't entail that we should plan everything or nothing.
Furthermore, that some communist economies have planned some part of the economy to bad effect means only that there's some evidence that planning that specific part of the economy might be a bad idea. The evidence, though, would not be conclusive; cultural, political, sociological, and historical elements in a society affect economic policy as much as or more than pure scientific economics.
It's also worth noting that economic planning is the status quo. First, most companies, and almost all large corporations, are organized along lines most people naively ascribe to communist governments. A cadre of self-appointing* bureaucrats, the executive management, makes most decisions about how to deploy internal resources within the corporation. This cadre has near-absolute power over not only junior members of the cadre, but all the employees. Employees are not only expected to obey, but expected to obey enthusiastically, and they must not overtly contradict the executive cadre. Yes, employees are at least technically free to leave, but the point here is that the fundamental organizational structure is itself viable.
Second, macroeconomic capital allocation is already made by a very small group of people: those who control not only their own personal capital, some of it very large, but also the executive cadres that control corporately-owned capital. Again, the point is not how the capitalist class (owners + executives) is organized (which is, of course, very different from how any group managing investment in a communist system), but that the status quo already is that a small group of people controls actual investment.
*i.e. the existing bureaucracy appoints its own new members.
Therefore, I see communism as endorsing not total economic planning, but more (and different) planning than a state capitalist would endorse, and probably a lot more (and a lot different) than a Libertarian would endorse.
Specifically, communism entails that the allocation of capital, i.e. investment, is heavily planned by "the government."
It's very important to understand that what we mean by "the government" varies according to what regime we're actually talking about.
Under a republican capitalist paradigm, such as the one we presently have in the US, "the government" comprises whichever faction of the capitalist class has greater popular support. Our current paradigm can thus be called a democratically modulated plutocracy.
Under "Communism of the Parties," the paradigm operative in China and the Soviet Union, "the government" consisted of one or another faction of the national Communist Party, itself a self-appointing oligarchy (that considered itself an aristocracy). I'm told there are some reasonable historical and social reasons why China and the Soviet Union ended up with an oligarchy, notably that the societies at the time of the communist revolutions had very little democratic popular culture. Furthermore both, but especially the Soviet Union, faced immediate, severe threats to their continued existence (e.g. Hitler), and could not afford to leisurely develop a democratic culture.
Even so, I don't much like the "Communism of the Parties" paradigm; I'm pretty much opposed to any oligarchy. And we do have something of a democratic culture in the US, and we don't have any severe existential threat. (Islamic "terrorism" does not in any way threaten the continued existence of the United States.)
"Democratic" socialism, a supposedly worker-friendly state that operates under the institutions and practices of republican capitalism, is problematic. The institutions of a capitalist republic evolved to support, well, capitalism; so long as private ownership of capital gives disproportionate economic power to the capitalists, they have both the motive, opportunity, and means to co-opt socialist trustee representatives. Sebastian Haffner documents an especially appalling instance in Failure of a Revolution, where the leaders of the Social Democratic Party turned against the workers they were supposedly representing to maintain their own prestige and privilege borrowed from both the capitalists and the hereditary aristocracy, unleashing and cooperating with the forces that would lead directly to Hitler and the Nazis.
I advocate something different: democratic communism. "The government" under democratic capitalism is a direct democracy, the people themselves, not their easily co-optable trustee representatives.
There are two obvious difficulties with direct democracy. The first is the scaling problem. It's very difficult to put every political and macroeconomic decision to a vote of more than 300,000,000 people, and even if we could, it would seem hard to ever get an affirmative decision. (Why should I care about building a new microchip factory in Indiana?) The second is the problem of expertise: what does it take, for example, to start a farm? There are a lot of issues there? What's the optimal size for a farm? What sort of equipment does it need? What sort of people? These are questions that only a trained agricultural economist can answer. We can't expect the people as a whole to be experts in anything.
I don't have the answers to these questions. We do have some clues, however. The Paris Commune used delegated representation instead of trustee representation. The representatives were arbitrarily recallable; unlike trustee representatives, individual delegated representatives did not have the power of office. Second, delegated representatives could not gain personal economic power. So perhaps we can use a system of delegated representation to solve part of the scaling problem.
The expertise problem is a little easier to solve because we already know how to separate expertise from interests. My physician, for example, is an expert in how my body works, but her expertise does not give her the power to control my interests. She can tell me that working too much is bad for my health, and do what she can to mitigate the effects of overwork, but she can't make me work less. It is up to me to use her expert knowledge to balance my own interests in good health and long hours.
That's essentially the same relationship that any political government has—or should have—with its bureaucracy. The bureaucrats are the experts in how to actually implement policy, and inform the political government of the objective consequences and limitations of policy choices, but it is up to the political government to actually make policy choices. The political government might choose unwisely, but lack of wisdom seems to be an inescapable part of the human condition. We've tried nearly every form of government imaginable, and every form has made astoundingly unwise decisions. The question is not whether we make mistakes, but what kind of mistakes we make. I'd rather we made the people's mistakes, not some aristocracy's.