12 Market prices communicate information, coordinate the actions of buyers and sellers, and provide the incentive structure that motivates decision-makers to act. The information provided by prices instructs entrepreneurs as to

(a) how to use scarce resources and

(b) which products are intensely desired (relative to their opportunity cost) by consumers. Market prices establish a reward-penalty system, which induces individuals to cooperate with each other and motivates them to work efficiently, invest for the future, supply intensely desired goods, economize on the use of scarce resources, and utilize efficient production methods. Even though decentralized individual planning is a characteristic of the market system, there is a harmony between personal self-interest and the general welfare, as Adam Smith noted long ago. The efficiency of the system is dependent on

(a) competitive market conditions and

(b) securely defined private-property rights.