Economic Calculation Problem Debunked!??

Economics Economics Questions
161

Yeah i have read about a partcular episode in latvia or lithuania or something. It is interesting how they have rules about not selling land to outsiders. and everyone kind of gets along with out money.

It is the most influential example of anarcho-communism to me, yet life still sounds like it sucks. I mean yeah you dont need to calculate to survive in a subsistance life style.

I could feel this way because of the relative deprivation i imagine i would feel living that society but that is only because i am brainwashed into beliving creativity and productivity progress more efeciently under cappitalism.

Right? And..

Capitalism only appears to be better because we measure everying in terms money, which doesnt have the ability to even express some costs and information.

Right?

The bottom line is that i will always strive for more. Just like people in a society where everything is made for them.

For example lets say i got to the fruition store to pick out what i want, i notice people always coming for a particular thing X, so i stock pile that thing X

Now lets say that i need to dig a hole and have a bad back. My nieghbor pops out of his house as i stare at the soil, he mentions hes going to the store to get X. So i say, “I have an extra X, how bout you dig this hole for me really quick and you can skip the store?”

Assume he says yes, all work is voluntary, fair enough.

Did I not just pay for labor? Could i not use this stratagy to gain emplyees?

I understand that i am imposing capitalism on top of your theory, and that in anarcho-communism, people wouldn’t think like that. And that some people are trying to convince me that me being rational actually isnt rational at all. But it doesnt really make sense. So we arrive at the same stop of trying to convince people to think the way you do.

162

First of, that is not an article, it is a summary of a ECP discussion made about 1/3 of the way through it, for the benefit of people just joining it who did not want to read 20+ pages. It is in no way a complete answer.

  1. & 2. One can always come up with some specific and contrived example like that.

Such a test would be rational for the chemist to make. But what if he then claimed that the most useful chemical for whatever purpose he has in mind was the one that he though had the prettiest colour?

Whatever a person is willing to pay most for is most valued by him, yes. But that rational decisions can be made on the basis on this subjective opinion does not follow. How much he is willing to pay says nothing about ethical, environmental, etc. affects.

“How much are you willing to pay to have this thing?” when referring to the environment or the ethical treatment of other humans is insane. It assumes that this person has the right to decide that; but what gives him the right to decide for others, those who may not have a voice? I guess poor people and future generations suffering is alright because we decided we didn’t want to pay for them not to suffer.

  1. It isn’t. Unless you are already within that frame of mind. You have already decided that only subjective valuation matters.

  2. It is the same argument over and over again. Only the opinion of those who have money matters. Future generations do not matter, non-humans do not matter.

“A person should work for whatever goal he wants to.” Anything else is slavery.

An interestingly anarcho-communist observation. Why can’t a person decide that without the market, say by getting together with other producers, pooling their resources together and democratically deciding? And why does being forced by circumstance to work for a goal one does not wish to work for, like working in a sweatshop, not constitute slavery?

  1. Same re-hashing of subjective value.
    There is a difference between people subjectively deciding how to fulfil needs (“I am hungry; do I eat a burger or a pizza?”) and subjective desire (rather, willingness and ability to pay) being the sole basis of decision-making in production. There is a connection, clearly, in that if more people want burgers than pizzas we’ll produce more burgers. But that does not mean that we get to employ child labour because people don’t take that into account when making their burger vs. pizza decision. One reason for this is ignorance, another simply inability to consider the whole picture when using an individualist perspective. See my example on the top of page 4.

  2. No, he doesn’t say that. And like I point out, there is no need to accept his specific definition of a steady-state economy. Steady-state is a concept that many economists use. The definition of steady state as allowing progress is not mine either, but lifted from such sources.

This line of reasoning was, however, not explored further in the discussion in question, hence the inadequate reasoning. But it remains something I’d like to learn more about at some point.

  1. & 8. Yes, that is the calculation problem. That’s what I am saying. That was the purpose of the summary; to clarify to those not familiar with it what exactly the ECP would entail in a non-market society that was not centrally planned socialism. It was followed by many different suggestion to how things would proceed in practice.

Ultimately though, the anarchist answer is that there is no one answer. No simple method that we can always apply. Every unique situation requires special consideration.
As has been pointed out, methods like the MDCA and the formulas of Kantovich can be employed. But you cannot demand a definite answer from a school of thought that denies the existence of such a definite answer.
"The premise is instead that the resource requirements and effects of alternative courses of action may be comparable on a number of different dimensions that cannot be brought into a single unit of measure. It does not pursue the “will-o-the-wisp” that is a complete statement of lost possibilities, which O’Neill considers a strength and not a weakness

163

I don’t know what world Apfel is living in?

When I look up Catalonia I find articles about people talking about the destruction of democracy.

"From El País: ‘Catalan elections and Spain’ | “A long pre-electoral period is ending in Catalonia with the feeling that only two parties have really campaigned: the center-right CiU Catalan nationalists and the ICV leftist-green splinter party. CiU has changed its methods - from the homely directness of the long-time CiU premier Jordi Pujol, to the aggressive-technocrat style imposed by the image advisors of current party leader Artur Mas. But there has indeed been a plan and a strategy thought out, and followed to the letter. The same can be said of the line taken by Joan Saura of ICV, patiently explaining the actions of the three-party coalition government of which ICV formed part - in sharp contrast to the embarrassed, vague attitude on the part of his coalition partners…

The campaign has had no brilliant moments. It has, however, provided some negative signals about the development of our democracy. The restrictions on news coverage in the public media, the postponement of the European summit on housing, the suspension of a student demonstration at the request of the regional interior authorities, cannot be said to be proper to a real liberal democracy. Democracy, or party-cracy? Who said that only the political parties have a right to express themselves in the pre-electoral period? Should this period not be the very height of freedom of expression? While in the rest of Europe there are people trying to make representative democracy a more participative affair, politics here is increasingly restricted to the narrow ambit of the parties.”…

http://www.barcelonareporter.com/index.php?/news/comments/has_catalonia_proven_itself_to_be_a_real_liberal_democracy/

164

Bearchu,

Anarcho-communism is still anarchism. What people “like” about what you do they can just keep to themselves. If you want o pay for labour and gain employees, by all means go ahead. As long as it is voluntary, no one could rightfully object.
I just don’t think many people would agree, unless you can offer them something special that no one else can. Perhaps you are a piano virtuoso or a fantastic singer, and will only perform if people do chores for you? Or something. I could work, just not en-mass I think.

Also, bear in mind that no one would care about contract. Sure, you could sign one off-course. But if one of the people who signed it got sick of “playing capitalism” and wanted to leave, it wouldn’t matter in the contract said he has a two weeks notice. No one would enforce it by coercing him to work for two more weeks.

But yeah, as long as you didn’t try to impose your will on people or destroy the environment, or engage in any other behaviour people around you found to be destructive or harmful to them, you could have your own ancap haven in an anarcho-communist society and no one would stop you.

justintempler,

Catalonia was in no way perfect. But it can serve as a good approximation of what economic calculation and decision-making would look like.
Just like people using Somalia or Viking age Iceland as examples of ancap aren’t saying those societies are perfect, just that some aspects of them can give you a general idea of what it would be like.

OK, now I’m out for real. Good night everyone.

165

I dont think you need to justify why wou blieve in anarcho-communism.

“But yeah, as long as you didn’t try to impose your will on people or destroy the environment, or engage in any other behaviour people around you found to be destructive or harmful to them, you could have your own ancap haven in an anarcho-communist society and no one would stop you.”

Which would inveitably happen at the highest level of every decision making level and people will decide that they want wealth and money will emerge again, essentially barter would take place then markey…even in anarcho-communism.

166

"justintempler,

Catalonia was in no way perfect. But it can serve as a good approximation of what economic calculation and decision-making would look like."

"In 2008 the regional GDP of Catalonia was €216.9 billion ($314.4 billion), the highest in Spain, and per capita GDP was €30,700 – similar to that of countries such as the United Kingdom or Austria. However, it had the fourth per capita GDP in Spain, considerably behind the Basque Country (€34,100), Madrid autonomous community (€34,100) and Navarra (€32,900). In that year, the GDP growth was 3.7%. In the context of the 2008 financial crisis, Catalonia is expected to suffer a recession amounting to almost a 2% contraction of its regional GDP in 2009…

Many savings banks are based in Catalonia: 10 of the 46 Spanish savings banks are Catalan and “L Caixa” is Europe’s premier savings bank. The first private bank in Catalonia is Banc Sabadell now fourth of the Spanish private banks.

The stock market of Barcelona, which in 2004 traded almost €205,000 million, is the second largest of Spain after Madrid, and Fira de Barcelona organizes international exhibitions and congresses to do with different sectors of the economy.

The main economic cost for the Catalan families is the purchase of a home. According to data from the Society of Appraisal on the 31 December 2005 Catalonia is, after Madrid, the second most expensive region in Spain for housing: 3,397 €/m² on average"

If you could just rid of all those nasty banks and the stock market then you’d have that nasty ECP solved, amirite?

167

Epic

168

Thanks for hanging in there, Apfel. I think we understand what each is trying to say at this point. Or at least that we have reached a wall for some reason that precludes further explanation.

There is one last question you seem to have. Why should someone with no money not have a say in the economy, in the environment, and why should he not benefit from nature’s bounty and man’s production?

The answer is very simple. There is only so much to go round. A method has to be devised to keep one person from just saying “Gimme it all.”

So the following system has been devised. Think of there being a huge store house containing all the world’s goodies. Anyone can take whatever he wants, but on one condition. He has to first put into the storehouse something of at least equal value. The benefits of such a system are obvious. The store house will be continuously replenished.

That is exactly what is happening in the real world [absent govt meddling]. A man works, meaning he is productive, meaning he has increased the world’s wealth to some extent. He gets a note, called a dollar bill. This note is basically saying “the bearer has contributed one dollar to the world’s wealth, and has the right to take a dollar’s worth of wealth for himself.” He takes the note, looks around for something he likes, and exchanges the dollar for it. Bottom line, he has contributed to the world’s wealth, and in return taken for himself an equal amount.

But if a person takes with out having money, it means he has taken without having first put anything in. If this is allowed to continue, the storehouse will empty.

EDIT: Of course we could have a system that forces one man to produce two dollars, of which one goes to himself and another to some stranger. So one person works for his food, the other gets it free at the first guys expense. But that is of course slavery.

169

“Catalonia was in no way perfect. But it can serve as a good approximation of what economic calculation and decision-making would look like.
Just like people using Somalia or Viking age Iceland as examples of ancap aren’t saying those societies are perfect, just that some aspects of them can give you a general idea of what it would be like.”

Catalonia was horrible, and far worse than the Icelandic Commonwealth or modern day Tribal Somalia, both in terms of rights violations, the destruction of wealth, and mass amounts of exploitation.

Also, people don’t point to Somalia or the Icelandic Commonwealth to give a general outlook of someone’s ideal anarcho-capitalist society, they point at them because they offer examples of governance in areas without formal government, and they look at Somalia specifically for its polycentric law.

170

“Fuck let them figure it out themselves then”? So you agree. But what you seem to misinterpret is, that this is an every day example of trying to match supply and demand how it happens a zillion times today per day! This isn’t a mere once in 100 years possibility. Usually demand is always way higher than supply. The market rations it with purchasing power (which you get if put something into the market).
Now you admitted that ancom has no idea of how to substitute this market feature in your ideology, in the case people do not exercise self-restraint as it is “expected” from them to do. As well as you also can not explain how and why people even should suddenly start to exercise self-restraint, not to mention of how people should even know how much they have to for which good/service! Command socialism had a substitute for the price mechanism, and this was ration arbitrarily by authority, which you (gladly) reject!

Only from these points alone I can already declare that as long as you cannot solve this as I call it The MSDP (The Match Supply and Demand Problem) anarcho communism is impossible!

Further you even state that the market doesn’t need to be suppressed, and people can use voluntary exchange as they please (which I am glad to hear), although i am wondering because your own ideology says: “All anarchists view profit, interest and rent as usury (i.e. as exploitation) and so oppose them and the conditions that create them just as much as they oppose government and the State.” There is no voluntary exchange that in one way or another does not involve profit, interest/rent or a wage and now you are even stating in response to my every day example of the MSDP “If the market is the best way in that case, fine, let them use it.”. So according to an anarchist FAQ I would even conclude that you aren’t a “real” anarchist.

I hope I could at least raise some doubts, and I also want to offer you one book for reading: Carl Mengers Principles of economics. It is for free, and I hope you will give it a shot.

171

What other valuation is there?

172

NOTE! All the things I link to are just examples, things to provide food for thought or explain what I mean. Do not take them to be sources.

justintempler,

You’re just being silly. Anarchist Catalonia offcourse, during the Spansish Civil War.

Felipe,

You mean how the brought up TVP from nowhere or accused me of mysticism for no particular reason?

Why don’t you get an account on some anarchist forum, pick whichever you want, and make an argument for comparability requiring commensurability. I will then accuse you of witchcraft and Republicanism, and a 15-year-old punk will cheer me on with an “lol”. You will then be able to yourself judge if that constitutes an “intelligent conversation”.

Smiling Dave,

The answer is very simple. There is only so much to go round. A method has to be devised to keep one person from just saying “Gimme it all.”

Agreed. I just do not think that a system where some people starve while others have more than they know what to do with is fair. Nor that it truly works that way; those who have the money do wind up with it “all” (though not literally of course) and still want more, and can get more, seeing as their wealth gives them that power.

And you still have not addressed those who cannot “contribute to the market” for other reasons than poverty, like not being born yet, being non-human, etc.

There is no empirical evidence that human needs are indeed infinite. Psychology (see Maslow* especially) instead tells us that there are general needs that most humans share, and that when these are fulfilled we are happy. Studies have actually shown that more material wealth does not increase happiness or satisfaction.**

*http://en.wikipedia.org/wiki/Maslow's_hierarchy_of_needs

**http://www.ethicsbasedmarketing.net/1.html
http://www.wcbsthailand.com/download/c2_pdf/Buddhism%20in%20the%20age%20of%20consumerism%20paper[1].pdf

http://www.intentionalhappiness.com/articles/July-2009/Money-Happiness-2002.pdf

skylien ,

Fuck, let them figure it out themselves then. :smiley:

Note the smiley. And my tendency to post buzzed :slight_smile: ← Lookitdat! Another smiley!

“All anarchists view profit, interest and rent as usury (i.e. as exploitation) and so oppose them and the conditions that create them just as much as they oppose government and the State.”

Indeed. But like I said, what I personally think is irrelevant when it is voluntary and happens within the context of an otherwise ancom society. Meaning that exploitation in the sense that circumstance forces a person to work for the basic necessities cannot occur, since those are feely available to everyone at no cost. If someone decided they want to clean your dishes so that they can hear you tell funny jokes, that is their problem.

“If the market is the best way in that case, fine, let them use it.”

I assure you that I am a real anarchist, but as such I cannot deny people free choice. I do not think that a market is a good solution, personally. But if those 10 people directly affected decided that “we shall decide who gets this house by our willingness to give something else up”, if they all went along with it voluntarily, that is their choice. How can I deny them that? It does not affect me, or society in general.

Understand that ancoms have a different concept of “voluntary” than ancaps; we would not consider a sweatshop worker to be there voluntarily, but forced by circumstance.

MSDP:

And capitalism can solve it? I think not; capitalism matches supply with ability to pay. There is a pretty big demand for food among starving people, and there is more than enough food on this planet for everyone*.
But it does not matter, supply is not matched to demand, but ability to pay.

And this is even without considering how artificiality scarcity skews supply**.

That there must exist some method of rationing that which, even after cultural shifts and changes in the attitude to ownership (like access instead of possession), is clear. But that purchasing power is the superior method rather than, say, democracy, does not follow. Different situation may even (gasp!) require different methods.
In the example with the brick house my answer was pretty much “who gives a shit?”. The decision is not important to anyone but those 10 people directly affected, and doesn’t even affect them that much. So let them figure it out however they want. But if what was scarce was instead medicine, things would be very different. In that case a team of doctors and medicals experts should probably decide who needs it the most critically.
In other situations you may have a vote, or look at statistical data, or use the same OR methods businesses today use when planning (this is the Kantovich formulas I refered to), like Just-in-Time, material requirements planning, cover-Time Planning, the order point systems, etc.***

*http://www.oxfam.org/en/pressroom/pressrelease/2009-10-16/world-food-day
http://www.wfp.org/hunger/causes
http://www.global-economic-symposium.org/solutions/the-global-environment/food-versus-fuel/strategyperspectivefolder/the-food-bio-fuel-hype

**http://en.wikipedia.org/wiki/Artificial_scarcity
http://www.cbc.ca/news/story/2010/11/26/con-artificial-scarcity.html
http://books.google.com/books?id=EgI30Za9mvcC&printsec=frontcover&dq=Ecological+economics+and+sustainable+development&hl=sv&ei=j2q5TZT2DNjU4waGxYT8Dw&sa=X&oi=book_result&ct=result&resnum=1&ved=0CDAQ6AEwAA#v=snippet&q=artificial&f=false

***http://en.wikipedia.org/wiki/Just-in-time_(business)
http://en.wikipedia.org/wiki/Material_requirements_planning
http://www.ies.luth.se/log/_private/Anders_S/IESM_CTP_AS.pdf
http://en.wikipedia.org/wiki/Material_requirements_planning
http://www.economypoint.org/o/order-point-system.html

173

z1235,

Exactly. You can poke fun all you want, but your heads are so stuck in the box you don’t even acknowledge a world outside it.

There are plenty: http://en.wikipedia.org/wiki/Value_theory

174

This made me laugh. There can be billions of theories regarding how something works, but it only works according to ONE of those theories.

175

Strudel,

Answer my question please. Who, apart from a subject, can value (i.e. can do valuation)? Or, how could values be anything but subjective? Please enlighten me, in less than 800 words, if possible.

176

After a glossing over the posted article I’ve come to the conclusion they didn’t get Mises’ point in the ECA debate. Let me explain it for those not able to digest it.

  1. All inputs (labor and capital) can be computed w/o a price (no need to compute cost monetarily, you can compute this easily in terms of units of capital and labor consumed versus units of goods produced). Mises doesn’t contend this at all.

  2. All measures of quantity demanded is measurable (again no prices coming into play yet). Mises, again, doesn’t contend this.

  3. Is the economic value of one good versus another is not computable. This is the thrust of Mises’ argument.

Point 3 is the most important point because it hinges on the theory of marginal utility. For those that don’t know how this theory works, it states that there’s a diminishing rate of returns on the consumption or production of another unit of a good (standard Neo-classical/Jevons interpretation). How do you compute the marginal utility of one good versus another? As Rothbard pointed out correctly, there’s no objective unit of utility. Utility in this case is decided on the ‘margins’ of a market transaction (where a producer is willing to make a good available to a willing consumer). The transaction cannot hold the perceived utility (as a unit) of a good and nor do the factors of production contain it. This means any counters to ECA have to prove that the value of a good can be computed without consideration of the individual consideration/valuation of a good (for both producer and consumer).

The posted article doesn’t sufficiently attack this point, it simply attempts to dodge it without valid justification.

177

Ladyattis-

The way around the calculation problem is proposed to be able to economically calculate with out a common demonator. And by calculating with dollars. We dont really acknowledge the price (socially, blah blah). The decisions are made by “society”, or those whom it affects. And also some done by computers

Which is complete crap. I think we all get this.

178

Z1235:

I couldn’t make it. I fought through the part about Mises being wrong because people can’t afford everything they want only to be assured that once we forget Mises and Rothbard and Menger and Bastiat and use technology to satisfy these wants on a decentralized basis then everybody will get what some other party thinks they want.

The argument to this foolishness is that one that Mises left out because he assumed the problem. That is things are scarce. The author pulls in some Venus Project arguments as well which still crash into scarcity. And the reasons are so simple: There are only two ways to distribute scarce goods with alternative uses:

  1. Free market exchange by respecting property rights.

  2. Through force.

All the computers and well intentioned folks can not except through force ration scarce things. If you use exchange to do it then you have to have a price system and a medium of exchange because barter is inefficent.

These schemes fail the BMW test:

Say you have a small crappy car. Will you be satisfied with my small crappy car when some dude cruises by in a BMW convertible full of folks who are sexually appealing? Is this true today when people have to spend their own resources to get the BMW? Will it be true when all resources are “shared”?

179

ladyattis,

This means any counters to ECA have to prove that the value of a good can be computed without consideration of the individual consideration/valuation of a good.

No, it does not. Objective valuation is not what you assume it to be. As O’Neill says, “[W]hat is good for us depends on something about us, on what we are like. What is of value to us can’t be separated from our capacities or the kind of beings we are. Whether something is valued by a person is furthermore determined by their beliefs in regards to the object of their desire.”

The position allows for individuals to feel differently, off-course. I and you may not satisfy our needs for, say, food in the same manner. I do not see why this is not possible in a society where decisions are made democratically.
I do however see why this is not possible in a society where the opinion of someone who is poor is irrelevant, while the opinion of someone rich is the law of the land.

The difference with objective valuation being that this position explains errors; individuals can be wrong about the value they assigned something because their valuation depends on belief, which can be erroneous. Subjectivists have countered this by introducing informed subjective valuation, but James Griffin asks:

“What makes us desire the things we desire, when informed, is something about them - their features or properties. But why bother then with informed desire, when we can go directly to what it is about objects that shape informed desires in the first place? If what really matters are certain sorts of reasons for action, to be found outside desires in the qualities of their objects, why not explain well-being directly in terms of them?”

In addtion, information not only changes preference, it can create new preferences.

Also, being a mod, any idea why my long response to the posts above has to be “approved”? That one took a while… :slight_smile:

Bearchu.,

“[C]omplete crap” is not a valid response to something economists and mathematicians have suggested, including a Nobel laureate. You’re gonna have to argue a bit more there, I fear…

But you are correct in the statement that the main issue of the ECP is the ability to calculate without a common denominator (once we accept that centralisation is epistemologically impossible, that is).

Bogart,

what some other party thinks they want.

Incorrect. Try getting through the litterature harder. A lot easier to debunk something one knows something about.

There are only two ways to distribute scarce goods with alternative uses.

No, there are an infinite. Drawing straws is technically (a crappy and silly) one. I think what you mean is that there are only two ways which practically work (and make some sense). Which is demonstrably wrong, as there are plenty of real world examples of methods other than those two. Like democratic deliberation.

the BMW test:

Glad you brought that up. This is what O’Neill dubs “positional goods”, goods who’s value depends on in what quantitiy others consume it. The value of a BMW lies not in the ability to transport you from A to B, but in getting you laid (and getting you respect). The problem with this “test” is that it admits that a cultural shift would render a BMW worth less that a monorail.

180

As O’Neill says, “[W]hat is good for us depends on something about us, on what we are like. What is of value to us can’t be separated from our capacities or the kind of beings we are. Whether something is valued by a person is furthermore determined by their beliefs in regards to the object of their desire.”

This is erroneous due to the fact that not everyone has exactly the same means to sense/perceive the world. Lets take a low order autistic person. They have little or no capacity to value art, their mind is quite literal and simple (not dumb). Or take a blind man, does he value a 3d movie? Of course not, he can’t see it. Can someone who derives pleasure from pain value vanilla style sex? Nope, s/he has a different pattern in the brain for pleasure/pain. In fact, the entire argument here depends on there not being a subjective formation (as Qualia) in the brain. That all brains form exactly the same way in the exact same environment(s)/condition(s). In practice, this doesn’t happen. That’s why we have niche or cottage industries (boutiques and such) for specific tastes. You can’t figure out exactly what people want or even really why because of the lack of a determinant (or natural filter) on value formation.