1. Incentive problem
• Moving up in the hierarchy means better housing, health care, and
the right to shop in a special store.
• In both the soviet union and pre-reform china, managers and
workers often resisted innovation.
• The government owned monopolies, no private gain accrued to
managers or workers for improving product quality or developing
more efficient production techniques.
• The lack of competition is also a discouraged innovation.

2. Examples and main ideas
• Managers and workers actually resisted government imposed innovations,
because higher and some times unrealistic production targets usually
accompanied innovations.
• Enterprises went on producing the same products with the same
techniques, even as both the products are the techniques grew increasingly
obsolete.
• Workers lacked motivations to work hard because there were so few
materials incentives, because of the low priority assigned of consumer
goods in the productions plans, only a limited array of inferior products and
services was available to consumers.
• “why work hard for more income if there is nothing to buy” as a soviet worker
once lamented to a western journalist : “the government pretends to pay us
and we pretend to work”

3. Outside opinion and perspective
• But if we cannot make use of the price mechanism, then how do we
figure out a way to allocate resources? The traditional alternative to
a Market based system is a Centrally Planned system; one in which
a group of people decide how the economy will be run for their
entire population. However, this kind of system has been criticized
because of issues relating to information: How do the planners
receive the necessary information to make informed decisions? How
can something as complicated as an economy be comprehensively
'planned' by one group? Won't there always be an informational
disconnect that exists between the population and the planners? It
becomes quickly apparent that a Centrally Planned economy is not
a very plausible alternative to the Market system.
• Resource,
http://thezeitgeistmovementforum.org/archive/index.php/t-268.html
by Jake Sully