To that the appropriate response is not the calculation problem; rather, this is:
The following statement is non-sequitur from the above. It goes from A to Z without explaining the middle ground.
It is speculation you have yet to prove. We cannot assume to know the capabilities of a make believe socialist dictator, nor the brutality which will ensue when his freshly made tea is not delivered promptly ontime. So we must resort to logic as to why he would be incapable of satisfying himself. We do not know how to deduce this conclusion. I am not prepared to disagree with you, which is what I have said numerous times, but if I present your argument to a socialist I would be presenting an assertion. But now we are just repeating ourselves from several pages ago.
[W]
That there is no other method by which the dictator can resort to other then economic calculation using prices is in fact deduced by logic. That is at the heart of the socialist calculation problem.
We know how to deduce the conclusion that he cannot calculate. So unless you are talking about the dictator possibly being Omniscient and Omnipresent (as Mises puts it), then we can indeed reach the conclusion that he cannot satisfy himself. That the dictator will not posses God like powers, I certainly cannot deduce by logic.
Not if you understand the socialist calculation argument. It is not an assertion that he won’t be able to resort to any method of rational economic planning.
If a dictator essentially owns everything, he is Mises’ Robinson Crusoe not needing outside input. Whether he can with his resources achieve the specifications for his warship does not pertain to the Misesian economic calculation argument. Though it is true that he would not be able to manage the affairs very well, the reasons are different, with more of a Hayekian slant.
I’m assuming most dictators are not concerned with costs.
And I re-assert my critique of your repetition
Based on this premise it does not logically follow to
As I said above, this is non-sequitur.
Your are correct, this statement above is not an assertion.
But this next one is
Taking liberties with loose language will not be successful with an intelligent socialist. We are not assuming that the dictator is omniscient, but at the same time neither are we.
I feel fairly comfortable in my understanding of the Economic Calculation problem. To successfully explain why a socialist country cannot calculate you must teach the socialist the functional purpose of money, valuation, and the praxeological implications of subjects(Praxeology and proper valuation is implied when Money is used, and market prices are allowed to develop). For these root tenants of the calculation problem are the axioms from which it is built upon.
This.
Yes but it is very different to say the market has an equilbrating tendency, so that et ceteris paribus arbitrage opportunities are closed to saying final equilibrium prices are realised in the real world. My point is not so much that free markets exactly match individual preferences, but provide the framework that best allows adaptation towards matching the changing preferences and conditions of the real world, and allowing for the most productive expansion fo the capital structure possible. This is really nothing more than Plain State of Rest to Final State of Rest analysis, acknowledging that we never actually reach the latter.
Secondly… I think I get what you’re saying about tacit knowledge now, tell me if I’m mistaken: The price mechanism itself provides the primary means for objectve interfactoral comparisons of production processes when making economic decisions, though through its operation it allows tacit knowledge of optimal allocations to be transmitted thrlough the profit-loss system. In other words, it allows the most productive processes to be promoted and replicated(hence “equilibration” as other entrepreneuts cotton on and close arbitrage gaps). This is is why you say the 2 are intimately connected.
I think my only objection to the “tacit knowledge” concept is possibly with the use of the word “knowledge.” To know something is to know something, not to appraise and guess, even if you are acting on that guess, that the price of potatoes consumers will be willing to pay will be $0.60 instead of $0.50. Of course if one is correct in one’s estimations, then this does allow the adjustment as described above to occur, though I’m still not sure it could be called “knowledge”, since one cannot be absolutely sure in one’s estimation despite whatever one’s local knowhow may be. Of course losses are just as important in such a system.
My question to you from the other thread is along the lines of what Caley and filc are arguing:
"…Is there a critique showing that I couldn’t build an island “society” consisting of myself as a single central planner and 2 million wise, strong, and perfectly obedient (self-less) robots? This is an honest question. "
"…I was questioning the feasibility of: (1) granting a socialist robot nature to the fundamental economic (human) agent and (2) using AE and human action to critique the socialist calculation problem. I don’t think you can do (2) while doing (1), but I could be wrong."
“…Do you mind outlining a critique for my 2 million robot island “society” in a paragraph or so? And how would the critique change if it was myself with only 2 robots (instead of 2 million)?”
I argue that you cannot simply (and charitably) erase the incentive problem (i.e. grant the socialists an incentive-less human agent) and still use AE to critique the socialist calculation problem. If you allowed me ANY agent model I could devolve the agent from an incentive seeking, praxeology-practicing human being, to a simple robot, or a tool, and just like Crusoe used tools on his island I, as a central planner, could as easily use my 2 million (or just two) tools, to satisfy my own island needs.
Z.
Well look, it depends what you mean by “satisfy” then. We assume “satisfy” in the context of this discussion refers to the ability, even if it is very limited, to organize society in such a way that it can still utilize the division of specialization in production. Only then can he build and maintain his factories, plants, and shops, in order to produce whatever he wants. Only then can he even maintain his vast apparatus of coercion and compulsion that is required.
I don’t know what other criterion for “satisfaction” you want to attribute to the dictator that is appropriate for the context of this discussion. If the division of labor breaks down under Socialism, then the dictator can satisfy himself only to the extent that other surviving individuals can satisfy themselves. But he is no longer a dictator in the true sense of the term once his society breaks down and seizes to exist.
Maybe you have a different idea of what the incentive problem is and that is where the misunderstanding is.
The incentive problem is that in a society with all the means of production owned by the government, there is no incentive for the individual to to more the bare minimum. The gains of every added value that he (worker) brings to production is completely dispersed among society, while his individual gain is practically zero. This has been perceived by many to be the main problem of socialism. So we grant the socialists for the sake of argument the ideal socialist man, who is inherently motivated not for his own personal gain/profit, but for the gain/profit of society.
Thus, we resolve the incentive problem for the socialists, but proceed to show that without the private ownership of the means of production and the individual profit motive, no money prices can form for the means of production. So socialism is doomed to fail even with your imaginary robot society.
The point is that there exists a great deal of knowledge that is very specific to time and place, more often than not this knowledge is very nuanced and can’t be put into words, much less be captured by crude aggregates. To put it another way, often it is more necessary to know “how” than to know “what”, a scientist might be able to explain exactly what one must do to get the most out of a given set of factors of production, but he can’t know how to implement this in specific circumstances all over the world.
The price mechanism allows individuals to economize on this knowledge, to use Hayek’s example, if a tin mine collapses and tin becomes more scarce as a consequence the central planner would have to know this and consciously make choices about how to reallocate the remaining tin resources. But prices mitigate the need for this, only those in the exact proximity of the tin mine need to know of the now increased scarcity. For other market actors they can simply use prices as knowledge surrogates that are telling them that the marginal value of tin has increased. So they substitute other materials for tin in the production process.
I see, so it allows the transmission of dispersed knowledge regarding anticipated supply and demand conditions given local, promixate external events and changes in data, thereby affecting the pricing of factors of production, such as in Hayek’s example, Tin. This is in addition to economic calculation functioning as an intellectual tool providing a rational means for cross comparing and selecting among a plethora of different production processes those that can be promoted and those not worth doing so.
Thanks, while reading your post I couldn’t help but get reminded of HSBC, and their adverts about local knowledge. Those guys are Hayekians![:P]
Hold on a minute. The dispersed knowledge problem is more then just about conditions regarding supply and demand. It is also about the knowledge that is required to produce the Tin itself. And not just Tin per se, but Tin in a particular form and at a particular cost so that it can actually be of value to some other area of production. The knowledge required for the modern production of Tin is dispersed among thousands and even millions of different people, who by the way, do not know each other. There is no way to bring these millions of different people to cooperate harmoniously without the price system. Of course, without the price system, the vast knowledge attained by such enormous division of specialization would not even come into existence.
Yes, of course, I should have mentioned that too.
Socialism (in propaganda) used to be about “the people”, “the workers”, “mankind”, “society” etc, not about the egos of the central planners. The calculation problem adresses the reason why central planning CANNOT be good for “the people”.
The way i understand it, the calculation problem is about the complexity of the economic problem created by multiple beings who have valid needs, not soulless robot-tools (even though those very tools, “the socialist man”, are granted to the opposition anyway). Thats enough to destroy the utilitarian veil of socialism.
It seems to me that this thread conflates the economic problem with the technical problem. Just rephrase the question: Can a super-smart singularity AI running on a super computer the size of Jupiter build warships? Of course.
In fact, it will be able to build things human capitalists cannot even imagine because their brains are too small.
So wether or not a socialist commonwealth can produce warship simply depends on the technical skills of the central planners. We have no a priori knowledge of what human central planners can build in socialism.
Maybe they can create singularity* AIs. We have no idea what posthuman AIs are capable of. Maybe they can cheat around computational restrictions by opening pocket universes and using them as huge calculators, becoming de-facto omniscient. Its already pretty hard to imagine what a supercomputer the size of the sun can calculate WITHOUT cheating. Therefore we dont know if Socialism can bootstrap itself into Utopia using AIs. What we know is that whenever someone wants to implement socialism, he better demonstrates his omniscience(or the source coude for his AIs) FIRST.
*A singularity AI can improve both the tools it uses (CPU etc) and itself (source code), using the improved versions to create even better versions. Those improvements happen faster and faster (exactly like technological progress does for humans right now). The point where humans give up and just call it God is the Singularity.
To which he would of course answer something like “we will bury you!”
The only argument that can persuade the socialist is that his system is quite simply impossible.
Yes he is Robinson Crusoe, and Robinson Crusoe alone cannot support an advanced civilization, which is why socialism is impossible. He cannot himself build a warship starting with plants and minerals.
It doesn’t make much sense to say “this in addition to economic calculation…” the heart of economic calculation is the use of profit and loss signals to guide production based on meaningful prices. If the prices aren’t meaningful, for whatever reason, then there won’t be a rational use of resources. To go back to the tin example, if the price of tin isn’t allowed to rise after the collapse of the mine because of government regulation then the shortage of tin and the increase in the value of the marginal unit won’t be reported, so to speak, into the price system and the decisions of entrepreneurs.
And your next sentence uses the exact opposite of what you just granted the socialist:
So my question is, CAN you grant the socialist “the ideal socialist man, who is inherently motivated not for his own personal gain/profit” and continue to use the exact opposite (individual profit motive) in your critique of socialist calculation?
(1) individual profit motive → (2) prices → (3) economic calculation
Your critique of the socialist calculation problem uses the exact opposite (1) of what you had previously granted. The individual profit motive (or lack thereof) reduces the socialist calculation problem to the incentive problem.
Z.
No, you completely misunderstand the incentive problem, or rather the criticism of socialism based on the incentive problem. The argument is that without the profit motive, the worker will not have the incentive to work hard and to contribute above the bear minimum. The socialists have been always trying to come up (unsuccessfully) with schemes of how to provide incentives to the worker to work for his fellow man without the personal selfish desire for personal profit. The socialist calculation argument grants them what they want. A worker that is self motivated to work work and work and does not care about his personal profit. The argument shows that it still cannot be done. Even if the worker is just dying to obey all orders and to contribute his best efforts and talents, if the profit motive is absent for all those who control the means of production, no prices can form.
Let me put it another way in case you still don’t realize it. It is true that in the absent of the profit motive, no prices could form. However, there was no lack of incentive to work and produce for society. The ideal socialist man had all the incentive in the world to work and contribute to production. He was unselfish and eager to contribute. Yes he doesn’t care for the profit motive, but he had all the incentive in the world. It was granted to him by Mises.