Economic Calculation and the Role of Prices in Privatization
This article appeared in the Winter 2024/25 issue of The Independent Review.
Since economic calculation requires the prior existence of property rights and market prices, the difficulty of efficiently privatizing resources is unavoidably greater in centrally planned economies. Privatization efforts will be more successful if they’re implemented in a bottom-up fashion in sectors of a transitioning economy with more access to market prices that are subject to international trade and competition. However, because the calculation problem extends to the creation of property rights, we should seriously temper aspirations to plan development.
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