ABSTRACT
In the centrally planned economy with which we have been concerned until now all the authority to dispose of resources resided with the government. In our first, and very simplified, model this authority was exercised directly by the government, which was presumed to be furnished with all the necessary knowledge and capacity. Our second model, which made a greater concession to human limitations, postulated the delegation of some authority to producers and consumers. Producers were told what to make and in what quantities, but they were authorized to choose the particular combination of inputs which they themselves thought would minimize costs. Consumers were left free to spend their incomes on whatever goods they chose. By thus decentralizing these decisions the government was able to ensure that they were taken by the people best informed about the relevant circumstances, producers being assumed to know about processes of manufacture and consumers about satisfaction yielded to them by alternative patterns of consumption.
