Theoretical Basis
The key theoretical basis for market socialism is the negation of the underlying expropriation of surplus value present in other, exploitative, modes of production. Socialist theories that favored the market date back to the Ricardian socialists, who advocated a free-market combined with state ownership of the means of production.
An important base for the first definition of market socialism in economic theory is the Lange Model, which states that an economy in which all production is performed by the state, but in which there is a functioning price mechanism, has similar properties to a market economy under perfect competition, in that it achieves Pareto efficiency.
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