I saw this in the Mises Institute Blog today:


Background : In the 1920s, way before the collapse of Socialism and central planning, Ludwig von Mises (and later his student F.A. Hayek) argued that socialism was unworkable, because the socialist system couldn't 'calculate' . There was no way the planners could know what to produce, when to produce in what quantities without having a proper signalling system.

In the free-market, the rise and fall of prices convey this information which is otherwise difficult or very expensive to obtain. The rise and fall of prices act as signals for entepruners (producers) to make decisions about productions. This debate between the Socialists and Mises is famously known as the calculation debate, no prizes for guessing who ultimately turned out to be the winner.