Well I have ventured from my castle of history and into the dark woods of economics. To start off I picked Mises’ Economic Calculations in a Socialist Commonwealth and I’ve had some difficulty conceptualizing the first chapter. I believe I have a handle on what I have read about the second chapter so far [monetary calculation cannot calculation spiritual/subjective value, it cannot calculate value without an exchange process] perhaps someone can can give a better wording to the points of chapter one. I’d greatly appreciate it.
As I understand it, Mises’ argument is basically:
1- Without private property, there can be no exchange.
2- Without exchange, there can be no prices.
3- Without prices, there can be no economic calculation.
4- Therefore, because socialism abolishes private property, it cannot calculate.
Also check out Salerno’s Postscript and Boettke’s “Socialism: Still Impossible After All These Years.”
There are some parts that I don’t get too but I’ll explain them on faith, maybe someone who actually knows what they’re doing will help elaborate on what I’ll write.
Anyways the first chapter goes like this:
So how a socialist state is set up governmentally and in its policy of distributing consumption goods is irrelevant to my present discussion; the only thing that matters is what effect the socialization of production goods has on an economy because if a socialist country is anything, it is one that has socialized production goods -it is a necessary condition for socialism.
Now taking everything into consideration it is obvious that a state with socialized production goods will behave like any other capitalist country in that there is still a use for money (in facilitating indirect exchange -which is more efficient than direct) and people will still use their money to buy consumption goods in varying patterns. But money loses one important function in this state of affairs which is to serve as a record of profits which would normally signal capitalists to reorganize their production goods to serve more profitable ends. But again, in this state all production goods are socialized, there are no capitalists, so why should there be profit?
Indeed, (and I don’t get this part so I’ll just repeat it on faith) it looks like it is absurd to say that a worker will get his full returns (consumption goods?) while also saying that production goods will be subject to a totally different (from what?) production processes.
So without capitalists it is imperative that the socialist planner be very weary of setting prices arbitrarily since it could lead to shortages/surpluses. This implies a very busy government but also it implies that the consumers ought not to be too free to exchange since the resulting changes in prices would be (too difficult?) to adjust too.
But wait, the socialist planner could just index consumption to labor hours worked by a consumer (assuming somesort of tax or deduction for obligations ot the community?). But the problem isn’t solved that easily since the labor hours worked are heterogenous in regards to value. So you have one guy digging holes in the ground and filliing them up while having another guy build a road and they are given the exact same pay though their labor will be different in value. Also it seems that this scheme of payment incentivices long-work periods because you are paid by the labor hours.
For some reason, the socialist can do anything he wants with regard to controlling the economy as long as he doesn’t allow “wages to exceed income”. -Whatever that means.
One of Mises’ arguments is that the calculation problem won’t trouble an adherent to the LTV doctrine, since if they are correct and one can reduce all prices to wage hours then it becomes possible, since wage hours would (presumably) be homogenous.
Now, those that believe in the STV, things are more problematic. Value is not reducible to anything other than the values of the consumer and cannot be measured, however, monetary prices allow the entrepreneur to compare heterogenous goods.
His basic debate againist socialist says without the price system/market economy, individuals cannot use economic calculation. Economic calculation can be crudely defined as the desire to adjust actions based on the present opinion of removing future uneasiness. In a market economy EC requires the price system, since it is the way that economic agents can determine whether they have made profits or not and whether a particular product is worthy buying or something to invest in. Perfect socialism involves all of the businesses coordinated by a central planner. Central planners are all humans. Humans are not gods. There is no way for a group of men who have been arbritarily designated as the monopoly owners of an industry to determine resource management. Where should resources go, who needs a particular resource the most, how much should they make, how they should get the materials needed to make their goods, etc etc. These problems are best solved in the market because there is a price system to coordinate supply and demand and where resources should go. It is the most efficient way, accordining to Mises.