I always thought that Mises was critiquing socialism based upon a model of distribution only and that any sort of indirect exchange was the area of his critique of market socialism, that’s certainly what his argument in HA seemed to be…
Any way, Mises has got some explaining to do, because as Rothbard made very clear non-specific factors only gain set prices through their possible monetary yield in other areas of production in the process of turning out consumer goods, which in turn makes their opportunity costs. If this occurs then things can be priced without any difficulty and if prices form based upon consumer demand then calculation follows.
So what is the problem with socialism?
My current guess would be that it has inherently to do with the matter of estimation of the effects of the shifting of factors will have upon the prices of the consumer goods and therefore the determination of where these should go, what will the effect be of an increment of X additional unit upon the price of product Y?
What?? But in the first passage quoted by Dave he assumed that money exists and is active in the pricing of consumer goods. If this is the case then the effect of the railroad upon the prices of certain goods could be seen as opposed to the reduction in prices that could be achieved if the relavent building materials were used in other areas… Couldn’t it?
Hopefully Esuric will answer, as he’s way better at this than me
ultimatley, you should recognize it as the same argument.
After Mises book on socialism new problems arose: such as the market socialists and the keynesians. Mises and Hayek were absolutel confused by the fact that the market socialists used economic language to try to explain socialism. So they thought that they simply weren’t clear enough in their argument before.
This sent Hayek back to try to speak the language and address certain things the market socialists were bringing up. Hayek had to point out that there were all types of knowledge (much of it is not communicated, so this hurts statistics) and that markets and prices acted as “knowledge surrogates”, or to be fancy “epistemological ecologies”. Something Mises hinted at when he called them “aids to the mind”.
Essays by Hayek that reflect this are:
Economic Calculation in a Socialist Common Wealth
Economics Plus Knowledge
The Use of Knowledge and Society
All of which can be found in his book Individualism and the Economic Order if that kind of thing sounds interesting to you.
Ok: The problem of economic calculation under Socialism refers to the inability to compare relative costs for the uses of factors of production due to a lack of a common unit with which they could be compared. Let’s have a look at Mises’ railroad example, but take a step back to the question ‘should it be built at all?’. We’ll assume that we need to transport x amount of goods from point a to point b and that we want to do this in the least costly way. What, in fact, is the least costly way of doing this? We could get people to take it by hand, we could breed horses to pull it by cart, we could build automobiles, or a railroad, or an aeroplane, or a ship. But how can we know which is the least costly? By what unit would we measure these costs? You might say that you could use time, which then falls back on technical efficiency. But the question remains - what are we comparing as efficient? It is not simply a matter of technical efficiency, since we need to deploy scarce, and where applicable non-specific resources in different amounts and fashions in order to do any of these things, and because they are scarce we must necessarily forego their other uses by employing them. So it is a question of the opportunity costs both of scarce time and scarce, non-specific resources. Technical efficiency, therefore, does not approach the problem of comparing costs.
If you think this doesn’t hold because there is in fact a common unit of measuring costs, can you please explain what this is? Or, if you think a common unit is unnecessary, point that out instead.
You’re not addressing my current problem which we’re talking about which is the fact that, if there are consumer goods which are exchanged through a universal medium of exchange, then the “unit” which you are looking for is the same one used in a capitalist society, MONEY. By comparing what other projects the factors used in the railroad could be used for then we could determine opportunity costs and from that point we could determine perfectly whether or not the bridge was useful and whether or not certain non-specific resources should or should not be used to complete the bridge
In regards to your question to Aristippus: First, stop assuming ‘correct’ capital paths are obvious or existent from DMVP. Second, shift your analysis on production of goods one ‘order’ (on the producer<->consumer spectrum) away from the consumer. See the problem now?
EDIT: Tbh I don’t understand your point with DMVP revealing a profitable capital path.
You say:
But capital goods are non-priced in our scenario. How does a producer know how much profit, not revnue, an additional good will bring?
I’ll be happy to address what you said, I refrained from doing so specifically because you said that you couldn’t post any more. I’ll get around to it later because I need to do something productive now since I just spent TWO HOURS WRITING UP A THREAD AND AS SOON AS I’M DONE WRITING IT AND I COPY A LINK INSTEAD OF WHAT I’VE ALREADY WRITTEN INTERNET EXPLORER SHUTS DOWN
Neo - Jargon is of the same opinion as I am so I refer you to his posts for my response. By the way: for longer posts, I usually copy-paste into Notepad as I’m writing.