The key importance of a rational system of pricing for the success of the economic reforms currently under way in the USSR has been widely recognized by both Soviet and Western specialists. In one way or another, the point is repeatedly made that without a durable, dynamic base for market-guided decision-making, the vitality of the reforms will eventually be eroded. The introduction of scarcity prices and the creation of a considerably enlarged area of decentralization in the economy are seen as essential to forming such a base and ensuring the efficacy of the reforms. The Soviet leadership itself seems to have come to realize the need to rely on prices for effective signaling of information about scarcities in the economy and for effective decision-making with regard to allocation of resources. For prices to perform their role in the economy well, however, it is not enough for the leadership to permit some or even all economic agents such as enterprises and cooperatives to set prices in a decentralized fashion. The existence of appropriate market institutions, including private ownership of the means of production, capital markets, etc. is crucial for the proper functioning of the price mechanism.