ABSTRACT
Every society-regardless of its wealth, its form of government, or the organization of its economy-must make basic decisions. It must decide what and how much to produce, how to produce it, and how the output shall be distributed. These decisions require fi nding out what consumers want, what technologies for production are available, and what the skills and preferences of workers are; deciding where to produce; and coordinating all such decisions so that, for example, the millions of people in New York City and the isolated few in an Alaskan fi shing village can all buy the milk, bread, meat, vanilla extract, mosquito repellent, and brown shoe polish they desire at the grocery store. The process of coordination involves creating incentives so that the right amount of labor and capital will be employed at the right place at the required time.
