I’ve been trying to wrangle an answer from socialists to the economic calculation problem for awhile, but the results have been poor. Closest I have come to an answer is a vague reference to bookkeeping and ‘playing market’ to generate prices. So I thought I’d ask here if anyone has received a more satisfactory response? Is anyone aware of a good source of information on how the ‘price simulation’ is supposed to work?
As far as I can tell socialist and even moderate leftist that just want to socialize a few things are intellectually broke on this topic. 90% of those I talk to have no idea what I am talking about. Those that have heard of it or after I explain it say something completely ridiculous like, “no, no, our system would be completely different and I don’t think you understand.”
I am actually fairly impress with whomever you spoke to and their answer of “playing marker”. It is still a ridiculous answer and from what I’ve heard, i don’t have a first-hand account, but I believe that is the best response and official retort of mises from the “great” socialist thinkers. Does anybody know the some of the leading socialist thinkers response??
This is as close as I’ve seen as a response to it. I’m sure few here will have much trouble dissecting it.
From my conversations with a Socialist, who is a Socialist in both name and ideology (member of International Socialist Organization), he points out Marx’s Labor Theory of Value, where value and price is tied to the labor that created it. I shot back with the Subjective Theory of Value, where the value of something is how much or how little an individual is willing to pay for it.
The labor theory of value is so easy to debunk, it’s almost not even worth the effort. If it took equal labor to grow a field of wheat as to grow a field of poison ivy, would anyone be so stupid as to claim that the products have equal value?
Most socialists are aware of the subjective theory of value and do not advocate a strict labor theory of value. Kevin Carson being a prime example. He uses the term in his writings, and because of this many libertarians simply utter the words “subjective theory of value” and assume his work isnt worth reading. I, personally, would like to read Studies in Mutualist Political Economy.
EDIT: Well, at least voluntary anarchists who claim to be socialists.
… EDIT 2.0: I mean voluntary socialists who consider themselves anarchists, such as Carson.
The formal economic response embraced by socialists was Oskar Lange’s market socialism model (http://en.wikipedia.org/wiki/Lange_Model).
Hayek engaged Lange with a series of responses in various articles published in the 30’s, as detailed here: http://cob.jmu.edu/rossermv/Caldwell.pdf
I was thinking that economic calculation would be possible if the LTV was correct. Not very efficiently, but perhaps in the sense that Hayek conceded. But since the LTV is utter nonsense, Mises’ original argument - that socialism is merely devolution to autarkic primitivism - hasn’t received a proper response yet.
From what I understand Hayek took the debate down a dead end by claiming that it was simply a matter of a central planner not having the “computing power” to calculate the price structure.
Later researchers concluded that Mises was correct in saying that economic calculation was impossible without market prices no matter what in opposition to Hayek’s view.
I would provide sources but they are in the Linux partition and the Blackberry will only provide the internets through winders…
But, yeah, the socialists haven’t been able to overcome this minor inconvience yet.
Hayek still maintained that a central planner wouldn’t have all the required information, but he did seem to let the opposition get away with nonsense.
Socialists do engage in some phenomenal rationalization with this one. Most socialists don’t even have a clear understanding of the issue and seem to trust that the eventual central planners will be able to take care of the issue.
AC, do you at least have the links? I’d be interested in this.
Also, just as a note, Hoppe, Boettke, Huelsmann and I think Murphy and Block have all extended and added upon Mises’ original argument. Boettke also deflects the poseur Caplan’s silly arguments against it.
Do check out that link I provided if you want to see at least an attempt at refuting it.
Lange’s solution was basically to use trial-and-error to find market-clearing prices. This wouldn’t be so terrible for consumer goods, but longer-term investments (such as capital goods) that take time to mature simply couldn’t be invested in rationally.
The critique’s of Hayek’s I’ve read had nothing to do with computing power (although its likely computing power and communication technology would aid in the planning of anything, central or otherwise, that wasn’t his point).
Inquisitor, that article you linked to is filled with some pretty terrible rhetoric (but thats used on all sides, so I’ll ignore it). I read some of it, but its rather long and slow to get to the point. Is there a summary of it somewhere? The author seems to be arguing for a system of free exchange where emotional bonds and such would take the place of currency? I really don’t see how its relavent to state socialism at all.
Grant, were you expecting much else? [;)] I found the link on a rather prolonged debate on the Mises blog, and the guy who posted it was a self-proclaimed anarcho-communist. I doubt he has a summary up anywhere. I posted it on the old Austrian forum too.
FWIW, from all the clarifications I see online, it seems the calculation argument is one of the least understood ones the Austrians make. I’ve noticed quite a few articles on the subject deal with the misconceptions of individuals trying to refute Mises. I’m not sure if it’s as bad as the case of the ABCT. Both are difficult arguments I guess.
I tried wading through it, but to be honest, I either didn’t understand the argument or it wasn’t there. It seemed to sidestep the issue almost completely. But I did like the standard anti-capitalist gaffs being sneaked into otherwise bearable argumentation. Especially the part about the ‘hungry poor’. Because we all know socialism has an amazing record when it comes to agricultural production…
I wonder if socialists need to rethink their agitprop. Since the poor in industrialized countries are starting to become morbidly obese, the old ‘hungry poor’ stuff is getting silly.
This solution is nothing more than a market economy where the government has a monopoly in every industry.
It is essentially indistinguishible from social democracy.
That purchasing power argument he uses in part 3 is a nice attempt but it’s ultimately based on a misunderstanding of Austrian theory. The purchasing power of each individual, at least in a free market, is representative of actual wealth created by that individual, so the limited purchasing power of each individual is in fact representative of the limited resources at their command which can be put to productive use. The calculation problem arises precisely because there are diverse ends but limited means to reach them. If the purchasing power of each individual were disconnected from the actual limits of existing wealth and made instead unlimited, there would be no ability to prioritize preferences and people would be unable to obtain any of their desired ends because their limited resources would be “spread too thin”. This is also precisely the reason artificial credit expansion by a central banking system creates waste; as the perception of available resources becomes distorted, there is allocation of resources towards lower priorities which should be ignored in favor of higher priorities, leaving less available resources to meet the demand for higher priorities, thus requiring an inevitable liquidation (which does not have zero cost) of those things with lower priority.
By the way, while we’re on the subject of the calculation problem, I’m curious to know what people here think of Kevin Carson’s Economic Calculation in the Corporate Commonwealth.