Central planning faced serious coordination problems that contributed to economic collapse. As economies grew more complex, central planners struggled to effectively coordinate the interconnected needs of different industries. If any single industry failed to meet its output target, it risked causing failures across other dependent industries in a chain reaction that undermined the entire planned system.

1. Problems with Central Planning
• The planning had serious problems that contributed to
the collapse of the Soviet economy and market reforms
in China.
• Problems become more difficult as the economy grows,
because to substitute central planning a coordinating
mechanism creates a significant coordination problem.
• Because the outputs of many industries serve as inputs
to other industries, the failure of any single industry to
achieve its output target causes a chain reaction of
repercussions.

2. Examples of Main Ideas
• Early planning under Stalin in late 1930s and 1940s and
under Mao in 1950s was relatively simple: the
Communist Party established a few key production goals
and directed resources toward fulfilling their planned
production goals.
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