1 3. Market prices establish a reward-penalty system, which motivates economic participants 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, as Adam Smith noted long ago, there is a harmony between personal self-interest and the general welfare. The efficiency of the system is dependent on

(a) competitive market conditions and

(b) securely defined private-property rights.