<P> Market socialism traces its roots to classical economics and the works of Adam Smith, the Ricardian socialists, and Mutualist philosophers . </P> <P> In the 1930s the economists Oskar Lange and Abba Lerner developed a model of socialism that posited that a public body (dubbed the "Central Planning Board") could set prices through a trial - and - error approach until they equaled the marginal cost of production in order to achieve perfect competition and pareto optimality . In this model of socialism, firms would be state - owned and managed by their employees, and the profits would be disbursed among the population in a social dividend . This model came to be referred to as "market socialism" because it involved the use of money, a price system, and simulated capital markets; all of which were absent from traditional of non-market socialism . </P> <P> A more contemporary model of market socialism is that put forth by the American economist John Roemer, referred to as Economic democracy . In this model, social ownership is achieved through public ownership of equity in a market economy . A Bureau of Public Ownership (BPO) would own controlling shares in publicly listed firms, so that the profits generated would be used for public finance and the provision of a basic income . </P> <P> Libertarian socialists and left - anarchists often promote a form of market socialism in which enterprises are owned and managed cooperatively by their workforce so that the profits directly remunerate the employee - owners . These cooperative enterprises would compete with each other in the same way private companies compete with each other in a capitalist market . The first major elaboration of this type of market socialism was made by Pierre Joseph Proudhon and was called "mutualism". </P>

Who possesses the factors of production in a market economy