Economic calculation in the socialist commonwealth

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1. jgmmoFeb 2012
   Socialism is impossible, due to the inability to use economic calculation when the means of production are State controlled.

   When you don't have profits, and you don't have market prices, then you have no idea when you should be switching away from some resources and using others. Resources get squandered, there's no way to make sure they go to their most valued use. That's the beauty of Capitalism, we make sure resources go to where they are most needed by selling it to the highest bidder.

   Ex: If copper prices go up, some people - those who can - will substitute away from it, thus allowing the copper to go to it's most valued use.

   If interested, I recommend 'Economic Calculation in the Socialist Commonwealth' by Ludvig Von Mises [http://mises.org/econcalc.asp]

   Also good is Friedrich Hayek's 'Competition as a Discovery Procedure' [http://mises.org/journals/qjae/pdf/qjae5_3_3.pdf]

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2. danthemanMar 2010
   This short essay from the 1920's lays out the fundamental flaws of trying to do economic calculations in the socialist state:

   Economic Calculation In The Socialist Commonwealth: http://mises.org/econcalc.asp

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3. danthemanOct 2009
   In fact you are wrong socialism can never work because it doesn't have proper price signals. There's an excellent paper: Economic Calculation in the Socialist Commonwealth that details this problem from the 30s.

   Also, it is very hard to have a mixed plan because eventually one will exploit the other. Game theory is great and all, but most of the time I don't think it applies to multiple trials -- which is what the real world is.

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4. danthemanJul 2009
   You sir, are incorrect, there are lots of discoveries in economics. They are just not empirical they are derived from logic and the study of human action. When studying a complex dynamical system its is impossible to make predictions, but there are fundamental laws that can guide human action and understanding. For instance, when printing money inflation occurs, by definition inflation is a term to describe increase in the amount of money. Now all things being equal when there is an increase in the amount of money prices will in general go up, more dollars chasing the same number of goods.

   If you're interested in solid well grounded economics, I highly encourage you to look at Carl Menger, Frédéric Bastiat, Ludwig von Mises, Friedrich Hayek, and Murray Rothbard. There are of course many more, but they are giants.

   Knowledge and information transmission and dispersal is a key economic domain. The price system is perhaps the most powerful information system ever invented since it allows people all over the world who have never met and to coordinate their behavior in mutual beneficial ways. A quick easy read is Economic Calculation in the Socialist Commonwealth (http://mises.org/econcalc.asp) is a clear example of how economic thought can be applied to predict outcomes of various systems, but notice it doesn't say in 10 years X will happen.

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5. logicalmonsterMay 2022
   Pointing out the corruption inherent when power is available is always a valuable thing, but socialism arguably would be suboptimal even if you make the impossible assumption that all humans are saints who are genuinely seeking the best possible outcome for their fellow man.

   The Austrian economist Ludwig Von Mises wrote an essay in 1920 called "Economic Calculation in the Socialist Commonwealth" which made the argument that without market pricing, rational economic calculation is impossible. To give an example: say that you had a plot of land to develop in a hypothetical city and wanted to do the best possible thing for the people with zero corruption. How can you know if building a hospital, a school, a factory, a mine, a shopping mall, new housing, a public park, a museum, or a farm is the best possible thing for the people? Those are all things that some people might see a need for. Without market pricing, you have no way of truly knowing what is valued more and what's the best use of a limited resource. Even if you democratically tried to decide in a genuinely fair way with informed citizens, there's no way to actually determine what is more valuable under a socialist system.

   To give the other point of view, this is somewhat of a debate and this idea has been challenged in various ways, see the following: https://en.wikipedia.org/wiki/Socialist_calculation_debate

   Personally I think the best argument against the calculation problem is that you can say that socialism merely tends to be inefficient compared to capitalism. However, I'd make the followup point that the system we have now is arguably not capitalism, but state corporatism. Winners/Losers in the marketplace tend to be determined more by lobbyists, lawyers, and corrupt politicians rather than through genuine open competition.

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6. narratorMar 2019
   If you look at the history of China and the Taiping rebellion[1] 20 - 30 million died over essentially a religious extremism driven civil war. If China can stop religious uprising with minimal damage to society and death, isn't that an improvement, or are big civil wars somehow more fair?

   In all things they take a pragmatic cost/benefit approach instead of solely thinking about dictums handed down from ancient books as the religious extremists do. The key question is: what is to stop all this from working?

   In the 20s, Hayek and Von Mises wrote "Economic Calculation in the Socialist Commonwealth"[2] and gave a great criticism of Socialism that eventually predicted its collapse. Mainly that planning without prices would be extremely inefficient. There really isn't a good argument that doesn't rely on natural rights to explain why China's system won't work from a utilitarian perspective, only ones that pull on the heart strings.

   For example, I often argue with Nazis on racist boards in order to talk them out of their false beliefs in the master race theories of the Nazis and how those false theories directly led to their downfall. The Nazis thought they could take over the world because they were a superior race and exterminating certain classes of people would solve all their problems. They really believed that. Those theories though were wrong, not only in a moral sense, but in a practical sense too. They invaded Russia in the winter thinking it would be easy and also did a lot of other really stupid tactical errors because they got high on their own supply. Many Jewish scientists immigrated and helped develop key technologies that gave the west massive advantages in the war, etc.

   Point being, you have to not just rely on emotional arguments if you really want to deeply understand the forces underlying and changing history instead of focusing on what makes one feel morally justified. Feeling morally justified is good, but a lot of people who end up participating in their own failure to achieve their goals feel morally justified, but what they are doing is not working.

   [1]https://en.wikipedia.org/wiki/Taiping_Rebellion

   [2]https://en.wikipedia.org/wiki/Economic_Calculation_in_the_So...

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