2.The debate over the role of the government
The government's role in economic management remains an unresolved issue in the current discussions of economic policy . The debate began in the early twentieth century , particularly in context of the argument over socialist economic calculation , and was led by Ludwig von Mises , Oscar Lange , Friedrich von Hayek , and the Austrian School .
Mises argued that rational economic management in socialist economy is impossible because of absence of market and price mechanisms. Lange disagreed with Mises , offering his concept of market socialism. Lange contended that central planning board can substitute for a market or price mechanism and resolve decentralized resource allocation problems. Lange 's planning board would be able to search for the optimal allocation or discover an equilibrium price vector either through trial and error or a process of successive approximation. Later , Hayek ( 1948 ) joined the debate , contributing to the rising prominence of the Austrian School as well as to the development of the concept of market competition as a dynamic discovery procedure. Although Hayek recognized the theoretical possibility of economic calculation by the central planning board in the socialist economy, he doubted whether such system would work practically because of the excessive information requirements. In the Hayeklan world , no manmade system can discover optimal outcomes of resource allocation without a process of dynamic competition.