In contrast, planners in more centralized systems have to guess which
innovations will be productive and which goods will be strongly
demanded. Central planning may achieve wonders by permitting a
massive effort in a chosen direction, but central planners also may guess
incorrectly about the direction and put too many eggs in the wrong
basket or reject as unpromising something that will turn out to be vital.
Perhaps the biggest failure of centrally planned economies was their
inability to encourage the experimentation and innovation that have
proven to be the driving forces behind long-run growth in advanced
market economies. It is striking that since the early 1990s most centrally
planned economies abandoned their system in favour of a price system in
one fell swoop. The only remaining large planned economy, China, is
quickly increasing the role of markets in most aspects of its economy.
