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Austrian Economics

Economic Calculation

The use of market prices to compare alternatives, allocate scarce resources and judge whether production creates or destroys value.

Economic calculation is possible when market prices for capital goods reflect competing uses and the judgments of buyers and sellers. These prices allow entrepreneurs to estimate costs, compare plans and learn from profit and loss.

Without exchange-based prices for productive assets, planners lack a common basis for comparing countless possible uses of scarce resources.

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