• Card 9 / 19: Describe socialism's "calculation problem" (which is NOT the same as the incentive problem).

    Answer:
    If the government owns all of the resources, then there can be no market prices for them. That means the government, when drawing up the detailed plans for what should be produced, won't have any way to quantify the costs of their decisions. The planners won't know if they are using resources efficiently. Sample Partial Credit Answer The government won't be able to calculate if it is doing a good job in its plan for the economy.

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Socialism: The Command Economy

Access: Public Peer Review

Attribution:  Dr. Robert P. Murphy, Lessons for the Young Economist. (Mises Institute), http://mises.org/document/6215/Lessons-for-the-Young-Economist (Accessed 04 April, 2014). License: Creative Commons BY
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