In the relatively free market society we live in over here in the west, business owners are capable of calculating their profits and losses efficiently. These business owners compare their work to the work of other businesses or their competitors to have a better understanding to see if their goods or services are selling less or more than their competitors. This system is known as economic calculation and is very helpful in preventing a lot of economic waste. Since we now know of this system of economic calculation, what is the problem that Ludwig von Mises(a famous Austrian economist), identified that a socialist economic planning board faces?
Like I mentioned above, in a free market society business owners are able to calculate their profits and losses to see if they are making an excess of economic waste. But in a socialistic society, it is very difficult to do this calculation because a government board is making all the economic decisions, which in turn means that they have nothing to compare their economic decisions to because there is no economic competition. The government is distributing what is being produced. This ultimately brings forth plenty of economic waste, poor financial decisions, and the waste of resources.
In conclusion, the problem that Ludwig von Mises identified that a socialistic economic planning board faces is that this board is not able to calculate their economic profits and losses, in the way of comparing those numbers to other businesses, to see if they are being efficient. This is one of the main reasons why a socialistic economy makes more poor economic decisions and more economic waste than say a capitalistic economy.