22Financial risk inherent in oil fracking
Adam Smith and Karl Marx
The central economic problem associated with Marxism is that production is based on quotas. In the Soviet Union, quotas were determined by Gosplan, where prices were arbitrary with little or no association with costs. Gosplan-administered prices allowed a Soviet company to have a checking account to pay for supplies and wages and deposit receipts. If prices generated a negative cash flow, the company received an injection of cash to keep it solvent (100% subsidized). If by chance funds were accumulating in the checking account, the excess was removed (100% taxed). Obviously there was no incentive to be efficient. Moreover, without prices related to costs, Marxist ...
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