Economic calculation problem

The Economic Calculation Problem refers to the challenge in central planning systems, where a single authority makes decisions about resource allocation without market prices. In a free market, prices arise from supply and demand, guiding producers on what to make and how much to produce. In contrast, without these price signals, central planners struggle to determine the most efficient use of resources. This can lead to waste, shortages, and inefficiencies, as they lack the detailed information that decentralized markets provide. Essentially, the problem highlights the difficulty of managing an economy without the feedback mechanism of market pricing.