hate to do this, but I really would like some more input on this thread.
Bump
Economic calculation means that one can compare the utility of different production processes according to a single monetary denominator, which allows for the estimation of profits and losses that are in actuality later determined by what individual preferences for consumer products will be. This in turn, allows for the local promotion of processes engaged in by entrepreneurs who act on plans that correctly anticipate the distribution of demand relative to the sector they inhabit. This is a complex process, but one that allows for an elongated production structure that best approaches consumer preferences required by the changing demand schedules, means end relations and external conditions as embodied in the real world.
When asking oneself about whether a socialist planner can produce an economy, we must establish what we mean by an economy. Even Robinson Crusoe can engage in simple several stage processes of production since he can directly compare input and output in determining whether it is worth engaging in them or not, by comparing what he must sacrifice. Such rudimentary problems however do not really match those faced by a larger society upon which the fruits of complex production structures are expected aspart of one’s standard of living. Indeed the problems associated with comparing which of a set of multiple processes should be promoted and the repercussions this has on the rest of the goods one wants to produce become much more magnified at that stage.
Without economic calculation, in deciding which process to promote one is essentially having to compare apples to oranges. Should good X be sent to be an nth order good in production process Y, or an (n-1)th producer good in process Z, should it be consumed, etc and if one should pick any of these processes, one would have to consider how this would affect the rest of one’s production plans in order to determine what would best approach one’s ordinal preferences in light of their current state and the demands set forth by one’s envirnomental conditions that are subject to change.I think the magnitude and complexity of this kind of “optimisation” problem has been fathomed by very few.
The only way I can see socialism “working” is if the socialists took over a highly advanced economy marx style, and didn’t change anything that was produced, kept the population static etc, and where the environmental conditions didn’t change, including supply of available goods to effectively produce a kind of Groundhog Day prison economy. Since the above mentioned conditions cannot exist, and we live in a world limited by scarcity and changing conditions whether we like it or not, and whether even the dictator’s preferences for what should be produced change or not, such a scheme is still doomed to fail.
Finally, there is no question that socialism “works” if one restricts oneself to producing a few directly comparable consumption goods with simple or single stage production processes, essentially in an “economy” that has not advanced beyond a neanderthal existence.
Hope that helped…(notice I didn’t need to mention the knowledge problem once either[:P])
Without calculation there is no way of comparing relative scarcity of inputs compared to relative profitability of outputs compared to effective (redeemable) demand. That’s basically it, economic calculation is the only sort of extra-personal economizing you can have, otherwise you’re shooting in the dark.
Market prices are also the result of a particular consumer’s productivity. Therefore market prices are both a function of what consumers WANT and how PRODUCTIVE consumers are. I do not think socialists have a problem with the first type of information being transmitted through prices. It is the unequal productivities that signal entrepreneurs to produce more goods for wealthy members of society.
So, I ask, does a redistributive economic system suffer from the calculation problem? Consumers still bid up prices of goods based off their preferences, and in doing so transmit information to entrepreneurs. What information isn’t transmitted is how productive those consumers are. What are the (non-incentive) consequences of this?
I feel like the calculation problem needs to be brought up to date. Socialism doesn’t mean state ownership of the means of production anymore. Maybe the calculation argument can be rehashed to apply to modern socialist states.
If by “redistributive economic system” you mean Socialism, then yes
The essence of Socialism is that private property of the means of production is abolished. There are no longer capitalists and entrepreneurs to bid for factors and establish prices for those factors.
GM? It was failing and gov’t stepped in to control the means of production with bailouts and other non-market driven so-called corrections.
Same with all the other status quo institutions that received bailouts. Same with legislation that crowds out competition. Same with taxes that are diverted from market needs to coercive gov’t wants.
It’s leaving in place, for the most part, the status quo without uncoerced marginal utility being able to take root in numerous sectors if, not all, within the market. The gov’t rather is forcing preferences of what stays and what goes. Where money goes, ie. taxes, and where it doesn’t. What gets crowded out of competition and what doesn’t. That’s socialism in the general sense of the term.
The bosses aren’t in the factories all together but Obama and others show up at them. There’s czars and other gov’t bureaucrats.
It’s still a question of consumer preferences v. gov’t preferences. That’s the existential state of affairs between what is called the free market and socialism.
I’m not sure if you’re overcomplicating this or you’re pointing something else out. I could be wrong of course.
You’re right. It is still around. But i think it is easy to argue against these kinds of takeovers with appeals to consumer preferences. Probably similar to the original formulation of the calculation problem.
The lynchpin of modern socialism is that an individual’s productivity determines how goods are allocated in society. Ideaologcally, they have no real problems with consumers expressing their preferences, so long as everyone gets to exert their preference equally. I.e. they are okay with consumer-demand information being transmitted through prices, but not consumer-productivity.
So, the old socialists wanted to cut off both sources of information about prices. Modern socialists only seem to want to cut out unequal productivity.
I don’t know if this is historically accurate. In Germany for some time nearly a century ago, the businesses remained in appearance as private. You could shop at different named stores but underneath it all the gov’t was allocating what stayed open and what didn’t. My history is lousy on this point. But I believe the slight of hand is between fascism and socialism. But each are socialism for all qualitative purposes of who’s actually pulling the strings. Fascism being a front to the covert socialism in the back room.
And what do you mean by “unequal productivity”? I thought that was even the whole idea of Marx. The bourgeois were a class dominating the worker class. Depending on what time era of Marx is read, but capitalism was to run it’s course and prove itself to be the failure it was and then one egalitarian class is left over with all people owning everything with no “unequal productivity” in place as all share in the wealth as one mass.
When I say modern socialists I should clarify that I want to talk about the modern fetish for wealth redistribution. A lot of the old socialism is still around, present in all the government programs etc etc. I wish to consider a society where the means of production remains private but where significant wealth redistribution occurs.
By unequal productivity, i mean to highlight that those who produce more goods are able to buy more goods due to their higher incomes. So prices on the market transmit information about a consumers demand AND their productivity. Redistributive economics recognizes the value of allowed consumers to bid up the price of goods they want, but thinks that productivity shouldn’t play such a large role in the price of goods.
Snowflake, I just had this thought. What if in some society it was totally voluntary to redistribute. Meaning people of their own free will gave away 1/2 of their income to their poorer relatives, out of affection.
Is there any reason to think something would go wrong? The only thing I can see is that the rich would stop being rich after a while, because they would run out of money. That would bring the place to a standstill.
But it would be very clear what to make and the best way to make it. After all, does it matter if the rich person buys goods with his full paycheck and then gives half of them as gifts to his poor relatives [which presumably doesn’t create any calcualtion problem, right?], or if he gives the poor relative cash?
So you are not talking about Socialism but Interventionism. You are talking about the hampered market economy where private property for the means of production is still dominant. Such a system still has markets and prices. This is a completely different type of problem.
Yeah that’s a good way of looking at it. It would confine wealth redistro to the incentive problem, which when run from the administrative side is still very strong. From the consumer side, the incentive sacrifice seems negligible compared to the payoff.
They still call it socialism though… makes analysis kind of confusing if you get sucked in like i did.
Ah. It is interventionalism, but I am currently thinking that interventionalism is isolated socialism. I think that the terms are qualitatively measured in scale or degree of, well, interventionalism.
Check this post out and see if this helps.
How much more? Pricing isn’t ‘necessary’ as such, we can all trade via barter if we had to. Life would kind of suck until eBay and easy shipping adapted but life would go on. The real issue is not what people want but what they’re willing to give up. Only a rational pricing system that is the result of voluntary trade can tell you that at any given moment at the individual and aggregate level, and money prices just provide a nice common factor in most exchanges to make it easier to see. The issue isn’t whether or not people want X more than Y, or the costs of production for either. The question is to what degree in terms of supply and time will people forego Y to get more X, and to what degree up and down the structure of production and forward into the future does it pay to shift resources toward X in lieu of Y, and everything else that can be produced, given the available resources.
Prices generate a pool of historical information which entrepreneurs will use to help forecast the future. Otherwise, if all we know is people want food, shelter, clothing, cars, and movies, we’ll produce those in whatever amount some putz or group of putzes thinks is ‘good enough’ or ‘adequate’, and we’ll always end up with a shortage or a surplus of all of them, with some resources having been directed toward production goals that people didn’t really want fulfilled at the expense of other goals, and thus wasted. So it’s not knowing what people want, or what you think they need, which you can’t know anyway. It’s about having an idea based on historical data and good old intuition of what to produce and when to produce it, and critically what not to do and to what degree not to do it. An entrepreneur deciding to devote his resources to producing MP3 players is just as much not deciding not to devote his resources to producing rubber dog shit.
The pricing system exists as a social phenomena whether or not money is used. Even in barter it is such that one hat is worth 3.5 eggs is worth 1.75 shoes etc. All the money does is generate the price system as traditionally understood with money as a common factor to all exchanges making the historical information prices can convey much easier to access and to assess, so people know what not to do and maybe get an idea of what they should do. However, no one knows the future, so it’s not like prices today will let you know the market for MP3 players a month, a year, or a decade from now. It’s just historical data that tells you what people wanted as much as what they didn’t want all that much, and so can perhaps give you an idea of what to do for the immediate future so you don’t screw up too bad, and perhaps even make a good decision.
That would require calculation in kind. One cannot add and subtract different “kinds”. Rational economic calculation required for the modern society requires a common denominator of exchange; money.
All that money does is enable the division of specialization, without which, you have no modern economy.
The modern Society would break down. Billions would starve and the few million who would survive would be reduced down to many scattered primitive barter economies. I am quite sure eBay will not survive.
Thats kind of an interesting thought. If government did involve itself in massive wealth redistro via currency transfers, producers could switch to an alternative medium of exchange, boycotting and eventually destroying the value of gov currency when people realize that big-producers won’t accept it. Thank god for legal tender laws.
One can’t add or subtract money either. Or more to the point, you can, but it doesn’t mean jack shit in terms of market prices or profits really. Making a profit of one dollar means different things to different people. Likewise just because a guy who buys a Sprite when presented with a choice of buying a Pepsi at a dollar or a Sprite at two dollars, that doesn’t mean he likes the Sprite “twice as much”. It just means at that particular moment he was willing to part with two bucks for a Sprite but not one buck for a Pepsi or even two bucks for two Pepsis. All you can tell is tendency and positive preference for one option over the others considered, and in reality that’s all the information you’re getting from prices and profits too.
Then why do economies thrive on two or more money standards? In the sense you’re speaking about it’s merely a matter of information accessibility. Having money as a common factor, not denominator, in all transactions just means the information flows much easier. However with modern technology it’s possible that need not be the case anymore, because it is possible that one could build and refer to an online barter community which does indeed store and respond to trades all over the world to generate an understandable model of the total array of goods and how they trade against all others proportionately. With the information storage and management capabilities we have today it’s technically more and more likely that you actually can compare eggs directly to everything else they’ve traded for and to what ratio they exchanged. You may still need the money economy underneath, but technically it might be possible build on the money economy to move back to a form of direct exchange to a limited extent that might be more efficient and beneficial for some. Hell, all that needs to happen to kick it off is for two eBayers to agree to trade listed, rated items rather than pay each other with money. The third factor is still there in the background, but not in the individual transaction.
I disagree. I don’t disagree that money likely will always be necessary to a certain extent, but I think you should give more thought to whether or not it’s possible to achieve the same ends via other means. If you think of money as just another technological advance, then it’s really just a matter of marginal alternatives. To a certain degree it’s already abandoned: commodities for cash, and now cash for check cards. Admittedly at the forcing of the government, but just because they forced it doesn’t it mean it wouldn’t have happened naturally on its own had the government not intervened.