The central planning approach failed because of information and incentives problems.

Question

Quizplus · Accepted Answer

Central planners faced difficulties in acquiring and processing complete and accurate information about consumer needs, production capabilities, and resource availability. Additionally, the lack of competition and profit incentives reduced the motivation of planners and workers to innovate, work efficiently, and respond flexibly to changing conditions. These problems ultimately led to inefficient resource allocation, shortages, surpluses, low-quality goods, and stagnation in economic growth.

The Central Planning Approach Failed Because of Information and Incentives