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

Question

Quizplus · Accepted Answer

Central planning relied on a top-down system where a central authority made decisions on production and distribution of goods without taking into consideration the diverse needs and demands of consumers. This approach led to a lack of information and understanding of market signals, resulting in inefficient allocation of resources and shortages of goods. Additionally, the absence of market competition and the lack of incentives for workers and producers dampened innovation and resulted in subpar quality of goods and services.

The Central Planning Approach Failed Because of Problems of Information