During the earlier part of the 20th century, an “Economic Calculation Debate” took place between economists; one side argued for a centrally planned socialist economy, the other for a laissez-faire capitalist one.
In this debate, Friedrich Hayek asserted that a planned economy would always be inefficient when compared to the free market because information is dispersed throughout society, and thus requires a decentralized economy in order to function efficiently. A centralized economy, which is managed by a limited number of people, possesses limited information.
Decentralized economic planning, by this understanding, would still be able to function in a society with dispersed knowledge the same way that a decentralized free market economy would. Beyond this, Hayek’s criticisms of centralized economic planning only hold true on the micro-level.
We find that in many cases where we lack complete information we can still make highly accurate general forecasts — we might not be able to predict the weather perfectly on any given day, but we can easily predict average temperature over the course of the next decade.
Since Hayek first made this argument in 1945, there have been over six decades of advancements in computer sciences and cybernetics, which allow us to gather, transmit and process information at unbelievable speeds.