In the past price reforms took place approximately every five years. The calculation of new prices took about three to four years and thus practically filled out the entire period between the reforms. The traditional method of calculation was roughly as follows: first the prices of primary products such as coal, iron ore, etc. were calculated. On their basis the prices of derived products such as electricity, steel etc. were calculated and on their basis in turn, the prices of further commodities, such as machinetools etc. The process of price calculation took place in successive stages up to the calculation of prices of the final products. This seems quite rational, but the problem is in feedbacks. As everyone knows, there exist in the national economy a great number of complex feedbacks. For instance the production of coal, electricity, etc. requires the use of the products of the machinebuilding industry. Therefore the correct price for coa1, iron ore etc. Cannot be calculated without knowing the price of machines. Since the traditional method could not take these feedbacks into account, price thus calculated cannot be considered as real production price. To achieve more correct prices it would be necessary to repeat the calculation several times, i.e. to do several iterations. But each iteration means a new calculation for two to three, millions products. Even if each iteration takes only two years and five or six iterations were sufficient for finding correct prices, the whole process would take too long. We have therefore come to conclusion that such a method is not adequate for the calculation of real production prices. Our experience has also taught us that after each general reform of prices, the results were quite outofdate because in the meantime conditions had changed, and under new conditions, they were not real production prices any more.
