Socialist calculation debate

The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.

Quotes

 * Thus in our view the Lange-Lerner-Taylor-Hayek debate comes down to the fundamental distinction between economies where: (1) prices and hence allocations are the outcome of a competitive arbitrage process which will, of necessity, be imperfect because of the costs of arbitrage as discussed in this paper, and (2) economies where prices and hence allocations are the outcome of a centralized allocative mechanism which will, of necessity, be imperfect because of the costs of monitoring bureaucrats. Thus, although we cannot provide an answer to whether a centralized or decentralized organization is more efficient, without more knowledge of the costs of operating a centralized informational mechanism, what we have established is that the conventional formulations of this question are misleading if not incorrect.
 * Sanford J. Grossman and Joseph E. Stiglitz, "Information and Competitive Price Systems", The American Economic Review, Vol. 66, No. 2, Papers and Proceedings of the Eighty-eighth Annual Meeting of the American Economic Association (May, 1976)