Good. It’s cool to see someone learning. Let me be devil’s advocate here for a moment.
The public will claim they want everything. The problem is scarcity means you can’t have everything you want. Without wages and a pricing system the state will have to find another way of prioritizing production. Couldn’t they just use something like Maslow’s Hierarchy of human needs? Producing food and water first… moving up to iPods and tvs later? This would ensure everyone would be clothed and fed! Yay socialist utopia…
1. I stated that the Mr Socialist knows what the public wants not as necessarily true, but meant it to mean “even if we will grant that Mr S knows what they want after they know they can’t have everything [as you pointed out this important piece of the puzzle], he will still have other problems.” I took this approach from reading a Rothbard summary where he stated that apparently some sort of trail and error approach might find out what the consumer wants to take home and consume. So I leave the field uncontested here; I [personally as a noob] don’t really know if Mr S can find out what they want.
2.About using Maslow to draw up priorities. Yes, that would work partially. Mr S would know to give something more basic higher priority than something less basic. Make sure everyone has food, then worry about TVs. But he will still have huge problems if this was all he had to go by.
Maslow’s Hierarchy, as you say, is one of needs. And he identifies at most ten or twenty different levels of need [I’m being very generous here]. However he did not and cannot create a hierarchy of the best way to fulfill a particular need. Each need can be satisfied in many ways. Take food for example. I assume there are literally millions of combinations of food that will keep one alive and healthy. And same with housing, and all the other needs. I don’t think Maslow ever intended the impossible, i.e. to make a hierarchy of desires, which is a very individual thing. Some want more sports on TV, some want more movies, some want more news.
The consumer chooses based on his desires as well as needs. So Maslow’s hierarchy won’t tell Mr S if more people will want TVs or Ipods or computers, since they are all in the same place in Maslow’s pyramid. They are all less important than basic food and clothing and shelter, but there is no hierarchy amongst them.
Make a little survey among your friends. Write down 100 random consumer goods and ask them to list which ones they would buy first [if they only could buy one] and which ones second [if they could buy exactly two] etc. Would they all say “Cuban cigars before jewelry before meal at fancy restaurant before latest movie?” Or milk before eggs before cheese before bacon?
He could still measure the price of steel in man-hours. Your counter is that he does not know the value of this labor because he has simply coerced his plan into action.
!. I heard tapes about man-hours being used as measure of price. The gist of them, as I understand it, can be brought out in a little story. Say diamonds and coal were unknown today. Suddenly some clever scientist manages to discover that buried in the desert 1 mile down there are 25 beautiful diamnds, 2 miles down there are 25 ugly industrial diamonds, and 100 miles down there is an almost endless supply of coal, millions and milions of tons of the stuff. Man hours needed to extract anything depends only on how deep down it is.
After everything is dug up, clearly the price of each of the three treasures will be inversely proprtional to the man hours used to get them out, because other factors of supply and demand outweigh the man hours factor.
Moral of the story is that man hours can’t tell you much about the price is going to be.
If he is so brilliant why did he make this mistake? It is theoretically possible for the planner to guess what the market would do. In this way, the calculation argument does not a priori stop a socialist state from functioning. It merely points out that in real life central planners will have many problems they don’t know how to solve.
The answer to that q is really the very heart of the matter. Assume Mr S knows by taking a poll or by trial and error or by some other way what people are willing to pay for something they consume. So he knows they will pay $100 for a TV. [We are generously giving him the maximum possible knowledge here. I gather this is because other economists have argued that there are ways of finding out that particular nugget of information].
So he sits down and cogitates. "Hmm, they will pay $100 for a TV, will they? That means if I use $200 worth of stuff to make the TV, I have made something that uses up two dollars of resources for every dollar of satisfaction. I better not do that. I have to find a way to make that TV for $100, so that I have an extra $100 worth of materials left over to make something else.
So let me, in my brilliance, make a list of things needed to make a TV, and see how much the costs add up to.
A. Two pounds of steel. Cost: Uh oh, I’m stuck. How can I know the price of steel when there is no one to sell it to? I own it all, and I’m going to use it all for something or other. No one is buying it from me or anyone else. It has no price because there is no market buying and selling it.
So no matter how brilliant he is, he can’t figure out “If there was a market, how much would Jones pay for it? It depends on how badly jones needs it, what he’s going to use it for, how many other people were trying to outbid Jones. Brilliant as I am, I can’t make up the correct hypothetical situation. Shoudl I imagine 300 Jones’s? !,000? Should I imagine that Jones has found a way to turn steel into some new marvelous invention that he can sell for millions, and is therefor willing to pay dear for steel?” Mr S is just stuck.
You’re assuming that the market would not have also produced TVs in the same way. After all, entrepreneurs can make mistakes too… But this is all theoretical.
1. Yes, Mr S might have indeed lucked out and decided what the market would have decided in every single one of the millions of decisions involved in making every possible consumer good. But it’s a stab in the dark he’s making. The odds of success, though not zero, are very very small.
As an example, say our overworked Mr S needs a doctor badly. This one Doctor D can save his life, and no one else can. But he forgot the doctors phone number, including area code and international prefix. “That’s no problem,” his wife says. Just peck out any 12 numbers at random, maybe you will end up dialing his number. I dunno. There must be a better way.
2. Entrepeneurs do indeed make mistakes. Sometimes costly ones indeed. But they have a much much better chance at success than Mr S does, because they know something important that he has to guess blindly at.
Say you are about to invest your life savings in a business. Mr S tells you “I run a TV factory. Before I build a single TV, I consult my Ouija board to find out how much every single material will cost me, then I build.” Mr E tells you the same thing, except that he finds out the prices of his materials by calling up suppliers. Who would you hire, and why?
If the state produced according to Maslow then this would not be true.
See above.
Maybe. But it would be possible to brainwash all your citizens so they are willing to die for you and then have them mass reproduce then take over the world or something.
[:)] Oh, in that case, no problem.