Government response to the Invisible Hand

The lack of market mechanisms frustrates government planning. This is also known as the economic calculation problem.

When people and businesses make their own decisions based on their willingness to pay money for a good or service, the information is captured. In turn, resources are automatically allocated toward the most valued ends.

Governments' interference causes unwanted shortages and surpluses. However, the forces that guide voluntary economic activity toward the benefit of societies are the same forces that curb the effectiveness of government intervention.