What Is The Importance Of Role Of Money In A Socialistic Economy?

The basic feature of Socialistic economy is that all means of production are owned and managed by state. The individuals can not possess profit earning properties. The operation of economy is controlled by the State and not by the price mechanism. As a matter of fact Socialistic economy will remain a monetary economy. In a Socialistic society persons would be paid money wages for their services. These wages would be used for the purchase of Govt. produced goods. Prices would be fixed by the Govt.

This would ensure that total demand would be equal to the total supply. In order to determine the order of priority and for the selection of the most efficient and economical method for the production, the importance of various projects and costs of various methods of production must be determined. The Calculations of such costs can only be made in monetary terms.

In short not only is the use of money necessary for a Capitalistic economy but even for a Socialistic economy as experience shows it is indispensable.