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Central planning often suffers from a coordination problem and an incentive problem.
Coordination Problem
A challenge faced by individuals or organizations when their interests conflict, requiring them to align their actions or decisions to achieve a common goal.
Incentive Problem
A situation where the incentives or motivations available to individuals or firms do not align with broader economic, social, or organizational goals, potentially leading to suboptimal outcomes.
Central Planning
An economic system where the government makes all decisions about the production and distribution of goods and services, controlling resources and directing activities.
- Familiarize yourself with the roles played by individuals and governmental bodies in distinct economic structures, such as command and market economies.
- Recognize the economic approaches historically utilized by countries like the Soviet Union and China before reforms and their consequences.
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Learning Objectives
- Familiarize yourself with the roles played by individuals and governmental bodies in distinct economic structures, such as command and market economies.
- Recognize the economic approaches historically utilized by countries like the Soviet Union and China before reforms and their consequences.
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