Central planning is plagued with coordination problem and an incentive problem? - Answers

Central planning often struggles with coordination problems because it requires a centralized authority to effectively manage and synchronize the diverse needs and activities of various sectors and regions, which can lead to inefficiencies and misallocations of resources. Additionally, the incentive problem arises as planners may lack the necessary information and motivation that market signals provide, leading to a lack of responsiveness to consumer preferences and innovation. This disconnect can stifle productivity and result in shortages or surpluses, ultimately hampering economic growth. As a result, the effectiveness of central planning is often undermined by these fundamental challenges.