Because of the inherent inferiority of coercive, centralized economic "planning" to the flexible, decentralized planning that takes place constantly in a free market, the socialist economy is prone to a host of inefficiencies in both production and distribution: widespread shortages of desired consumer goods, surpluses of undesired goods, unemployment or underemployment of factors, generally low standards of living, and so on. In practice these difficulties are alleviated by tolerating small areas of private property and illegal black markets. Because production levels in this tiny private sector far exceed those of the remainder of the economy, the socialist system is sustained in large part by pockets of freedom where socialism has been abandoned. In the latter days of the Soviet Union, for instance, approximately 25% of the agricultural output was produced on the 4% of the arable land that was held in private hands (source).

In particular, a socialist economy cannot consistently and adequately factor the costs of and risks to land—that is, environmental resources—into its decisions. Consequently, it tends to damage or squander those resources. For example, the formerly socialist economies of the Eastern bloc, despite their minimal production and consumption levels, left in their wake rampant pollution and other environmental depredations, far exceeding any such problems in the much more prosperous, relatively free economies of the West.