In the socialist or centrally planned economies all the productive resources are owned and controlled by the government in the overall interest of the society.
A central planning authority takes the decisions.
The socialist economy has the following main features.
 Collective Ownership of means of Production
In a Socialist economy means of production are owned by the government on behalf of the people.
The institution of private property is abolished and no individual is allowed to own any production unit and accumulate wealth and transfer it to their heirs.
However, people may own some durable consumer goods for their personal use.
 Social Welfare Objective
The decisions are taken by the government at macro level with the objective of maximization of social welfare in mind rather than maximization of individual profit.
The forces of demand and supply do not play any important role.
Careful decisions are taken with the welfare objectives in mind.
 Central Planning
Economic planning is an essential feature of a socialist economy.
The Central Planning Authority keeping the national priorities and availability of resources in mind allocates resources.
Government takes all economic decisions regarding production, consumption and investments keeping in mind the present and future needs.
The planning authorities fix targets for various sectors and ensure efficient utilization of resources.
 Reduction in Inequalities
The institutions of private property and inheritance are at the root of inequalities of income and wealth in a capitalist economy.
By abolishing these twin institutions a socialist economic system is able to reduce the inequalities of incomes.
It is important to note that perfect equality in income and wealth is neither desirable nor practicable.
 No class conflict
In capitalist economy the interests of the workers and management are different.
Both of them want to maximize their own individual profit or earnings.
This results in class conflict in capitalist economy.
In socialism there is no competition among classes.
Every person is a worker so there is no class conflict.
All are co-workers.
Socialism in today’s world
Countries such as Russia, China and many eastern European countries are said to be socialist countries.
But they are changing now and encouraging liberalisation in their countries for their economic development.