2. Economic planning:
A socialist economy is a fully planned economy. Planning may be centralized or decentralized. All the basic decisions for the control and regulation of the economy are taken by government. Similarly all the basic and strategic functions are performed according to a definite plan. Formulation of plans is the responsibility of a central planning authority.
3. Social welfare motive:
In a socialist economy research are used in production process to maximize social welfare instead of private profits.
Social welfare is the basis of all economic decisions and economic policies. Price policy is guided by social welfare motive. Everyone is entitled to the benefits of socialized production on the basis of equal rights.
4. Little importance of price mechanism:
In a socialist economy the price mechanism is given a minor role in resource allocation. A specific plan based on social needs provides guidelines for resources allocation.
However, in democratic socialism the price system is allowed some role according to the size of private sector.
5. People co-operation:
Socialist economy is a planned economy. No plan can possibly succeed without the active participation of people.
Therefore, while fixing the priorities of plans the central planning authority keeps in mind the interest of the community to seek the active participation of people in the implementation of plan, the government may provide special incentives.
6. Lack of competition:
The resources are in government ownership. Therefore, government decides-what, how and for whom to produce.
Prices are determined by government because productive enterprises are state monopoly. Govt., avoids all sorts of rivalries and competition among state enterprises. Thus there is absence of competition in a socialist economy.
7. Non-existence of social parasites:
In a socialist economy the society is not divided between haves and haves-notes or between ‘master and servants’.
In other words the society is not classified between capitalist and working class. Here all arc masters and all are workers.
The philosophy of a socialist economy is-“to each according to his needs and from each according to his ability.” Thus there is no place of social parasites and no possibility of exploitation.
8. Equality of opportunity:
Socialism guarantees equality of opportunities and equal pay for equal work. Government does not discriminate among members of the society on the basis of cast, creed, religion and sex.
In short, a socialist economy is not controlled and regulated by market mechanism. It is a comprehensively planned economy. This economy is in sharp contrast to a capitalist economy.