Solution to socialist calculation problem:
100% state owned capital, but privately owned profits.
The enterprises could all be nationalised while maintaining market guided capital structure. It would work by democratically(directly or indirectly) appointed managers, that could also do as they wish with the profits of the state company they manage. This would incentivise them to make the state owned firm more profitable, aka more valued by its customers. there could even be state enhanced profit mechanisms, like managers that make more profits(or expand capital structure) getting a longer appointment time, or getting more state benefits. They would also be more likely to get re-elected.
No.
The calculation problem doesn’t deal with incentives, as much as it deals with calculation, or rationing, without a price mechanism. Clearly, if “capital” is 100-percent state owned then there really is no price mechanism to ration out said capital.
Profits aren’t capital?
facepalm
Dare I ask, if someone was not satisfied with the performance of a state run company in an area, could he attempt to start up his own business to compete?
100% state owned capital, but privately owned profits.
Would losses be privately borne too? If so, then the capital wouldn’t really be state-owned.
The manager gets more profits by producing according to market conditions. He would be able to manage the state capital, use the equity if the state company to make it more efficient, etc. Just couldnt keep the enterprise after his term is over, only the profits he chooses to cash in.
I dunno, could be both ways i guess? And the capital would still be state owned, the managers dont keep any of the capital after their term ends, just the profits they cash in
Like I said, it has less to do with “profits” and more to do with the distribution of goods through the price mechanism. Like I wrote in my primer,
While business-cycle theory is perhaps what the Austrians are currently most well known for, there is a myriad of other concepts the Austrians introduced or expanded upon. One such insight is that of the socialist calculation problem.
There is no objection amongst economists that given the existence of scarcity, the market is in need of a rationing device. Most economists, except those in extreme favor of centralized rationing, will also agree with the notion that price is the best rationing device of the market.[28] While price hardly acts as a measure of value, due to the fact that no object has an objective value,[29] it nevertheless serves as a useful tool to coordinate production by serving as a conveyor of information between different market agents and a method by which an individual can decide whether or not a particular action is economical.[30]
In a socialistic economy, where prices are absent, this coordination would simply not exist. There would be no host of individual agents communicating through the price mechanism and allocating resources by means of subjective ratiocination. As a result, all meaningful economic activity would come to a halt. Complex programs would be impossible to complete economically, since without a price mechanism there would be no way for a central planner to distribute resources according to their most economical use. Thus, socialist economies are bound to fail.[31]
Just so we are all on the same page, could you explain in your own words what the calcualtion problem is?
Austrians usually use the word capital meaning the goods that help to produce other goods: machines and all that. Money is what allows you to buy capital goods.
Jon, prices would exist in much the same way they do now, the state companies would trade with each other, have their own balance sheets, and form a capital structure.
It doesn’t sound like you are addressing the calculation problem at all, only the incentive problem. How are the decisions being made as to what state-owned capital goods are being created in the first place?
If “capital” (except profits apparently) was 100-percent state owned, I don’t think we would have a price mechanism such as the one we have under a relatively capitalist system. Otherwise, “capital” would not be 100-percent state owned, or it would be state-owned in the sense that everything is state-owned today (it can be expropriated by use of force).
the managers of existing companies could expand the company or create a subcompany(perhaps with the profits made with the original company) that would again be under the hands of the state(except for profits)
It certainly would be different, a new and exciting system!
the managers of existing companies could expand the company or create a subcompany(perhaps with the profits made with the original company) that would again be under the hands of the state(except for profits)
So the state is going to nationalise existing firms? And then decide to produce (or allocate) capital goods for them companies how?
The state appointed managers decide that. And allocation through prices, profitability.. I said that in a previous post read first please lol
So why would I invest my money in a capital good that its going to be owned by the government instead of spend it on me? (And if you are going to say that because that will increase my profits, it might but I can be kicked out of the management of the company at any time, so its not a very inviting situation). Most people would not re-invest the money.
Also, how do you decide what’s a capital good and what its not? A computer is a capital good?
nandor, would you mind responding to my point above?
The state appointed managers decide that. And allocation through prices, profitability.. I said that in a previous post read first please lol
But you just said currently existing managers. However, what more could competing managers decide if the state controls all the goods, it would just be a monopoly where there previously wasn’t one.
So managers would “invest” their profits into something they don’t own? The state would be well advised to immediately fire such doofuses and send them straight to a gulag for the crime of illegal stupidity.