Question

3) Explain in your own words the Economic Calculation Problem. How would you use the insights of the Economic Calculation Problem to understand an event that you have observed in your life, an event from the news, or an event in your life?

Answer 1

Answer) In my view economic calculation problem is an issue of how resources are allocated irrationally, majorly when we look at how it is controlled and determined by central body in most of the cases, ignoring input from other stakeholders, it is like a pre defined system is being used for all situations and resources are allocated based on that criteria. Such allocation and planning results in poor execution as different situations demand different strategies and allocation.

An event I have observed is at luxury chain of salon, where a pre defined criteria was used to allocate capital and workforce for different outlets, CEO used to look at outlet appointments for the month and allocate more capital on marketing activities where  appointments or footfall was low ignoring the input that footfall was low owing to less staff ,such type of problems are borne out of not involving the players on ground and being too much dependent on a particular way of allocating resources leading to inefficiencies at every level,one should use insights from economic calculation problem in such cases to be flexible a d not rigid with a particular method.

Answer is complete. Thank you!