- Uh oh, guys. Time to put on our thinking caps. He is going to quote the redoubtable Bryan Caplan. For some reason the links he provides to Caplan’s paper doesn’t work, but here is one: http://econfaculty.gmu.edu/bcaplan/whyaust.htm
Bryan Caplan caught Mises in an embarrassing contradiction. Let’s have a look see:
He begins by quoting Mises:
Socialism is not a realizable system of society’s economic organization because it lacks any method of economic calculation… Socialism cannot be realized because it is beyond human power to establish it as a social system.
Can you spot the boo boo, Austrians? Here it is, explains Caplan:
This conclusion is amazing, for Mises repeatedly insists that economic theory gives only qualitative, not quantitative laws?
As we stare in shocked disbelief, Caplan backs up this claim:
For example, in Human Action, Mises tells us that:
The impracticality of measurement is not due to the lack of technical methods for the establishment of measure. It is due to the absence of constant relations. If it were only caused by technical insufficiency, at least an approximate estimation would be possible in some cases. But the main fact is that there are no constant relations. Economics is not, as ignorant positivists repeat again and again, backward because it is not “quantitative.” It is not quantitative because there are no constants. Statistical figures referring to economic events are historical data. They tell us what happened in a nonrepeatable historical case.
Boy, that really zapped old Mises didn’t it? Economics is a qualitative science, so you tell us, von Mises. In that case, what have numbers to do with it? How can you say economics is purely qualitative, then turn right around and insist that socialism MUST have numbers [which you claim it cannot supply] in order to survive?
Introducing his next line with a mysterious “if so” [if what?], Caplan follows through:
If so, then how could he possibly know by economic theory alone that the negative effect of the lack of economic calculation would be severe enough to make socialism infeasible?
Meaning not only are you contradicting yourself, and also being unfair to poor old socialism, insisting it must have numbers when you just said all of economics doesnt need any, but there is a third problem here as well. Stripped of the use of numbers, throwing them all out the window when it comes to economics, as you so foolishly insist must be done, Professor Mises, how can you possibly say how bad the calculation prob will be? You need numbers for that, too.
Caplan repeats this point to make sure we get it:
Granted, the socialist economy would suffer due to the impossibility of economic calculation; but how, on his own theory, could Mises know that this difficulty to so severe that society would collapse?
And to make sure the mentally challenged among us really understand, Caplan explains further. Mises says one guy living alone on a desert island could calculate. Then 2 guys, could too, right? But billions of people can’t. So there must be some NUMBER which the minimum amount of people that cannot calculate. A NUMBER. You know, that thing you told us economics is not allowed to use, ever. In his own words:
The strength of this objection becomes even clearer when we consider the economic decision-making of Robinson Crusoe, alone on his island. As Mises explains, “Isolated man can easily decide whether to extend his hunting or cultivation. The processes of production he has to take into account are relatively short. The expenditure they demand and the product they afford can easily be perceived as a whole.”[28] Crusoe’s runs his one-man economy simply by using “calculation in kind” - mentally weighing his preferences and opportunities to make decisions. Mises concedes that this situation is conceivable, adding only that this method is unworkable for a larger economy.
[Mises just told us one guy living alone could be a successful socialist. No calc problems for him].
“To suppose that a socialist community could substitute calculations in kind for calculations in terms of money is an illusion. In an economy that does not practice exchange, calculations in kind can never cover more than consumption goods. They break down completely where goods of higher order are concerned.”[29]
[But a whole community will not make it. They will have a calc problem].
This suggests some obvious questions. Does Crusoe’s one-man socialism become “impossible” when Friday shows up? Hardly. What if 100 people show up? 1000? Mises’ distinction between a modern economy and Crusoe’s, and why the economic calculation argument applies only to the former, again shows that Mises has underlying quantitative assumptions in spite of his strictures against them. He is making a quantitative judgment that the lack of calculation would not greatly worsen Crusoe’s economy, but would devastate a modern economy. Perhaps Mises was right, but pure economic theory did not give him the answer.
[Aha! It works for one, and for two, right? But not for a whole community, hey? Then there must be a NUMBER, yes that baby you threw out the with the bath, which is the cut off line. Caught you with your hand in the cookie jar, Ludwig, using underlying quantitative assumptions].
And let’s not forget Robin Cox, who pipes in with his version of Caplan’s argument:
According to Mises in Human Action (quoted in Caplan), “economics is not, as ignorant positivists repeat again and again, backward because it is not quantitative. It is not quantitative because there are no constants”. But if that is the case, how could you quantity the negative effects of this supposed misallocation in a hypothetical socialist economy and come to the conclusion that they were so severe as to make socialism infeasible?
- OK, time for the defense to make it’s case:
Me: I’m just a simple country boy, Professor Caplan…
Cox: No, I’m the simple country boy, striving to be a Spanish peasant. You are a decadent bourgeois running dog for the fascist imperialist so called…
Caplan: Let him have his say, Rob.
Me: TY Bry. Let’s cut to the chase. Bry, you are confusing the object under study with the methods used to study it. You are saying one has to be a traingle, not a human being, to study geometry.
Cox: I’m still in high school, will this help me cut geometry class?
Me: All Mises was saying is that you cannot find an economic law by sifting through piles of statistics, or by plugging in a formula with numbers in it. You have to use your noodle, not your pencil.
Caplan: But he’s saying socialists and capitalists MUST use numbers. So why doesn’t he have to, also?
Me: Because he is not running an economy, he is studying how economys are run.
Cox: And George Orwell accused us of doublespeak!
Me: Let me explain. Have you guys ever opened a book on Mathematical Logic?
Caplan: Sure. Stupid book was full of upside down A’s, backwards E’s, arrows, squiggles, parentheses, cups and caps. Not a single number in the whole book. Tossed it away as useless. How can it possibly teach any Math?
Me: It was not teaching you Math, but about the correct way to study Math, about the limitations of Math, about the logic underlying Math.
Cox: And Mises?
Me: He was teaching you about what happens when people buy and sell. And they buy and sell using numbers. More than that, he claims that if they don’t use numbers when buying and selling they will flail about in the dark, wasting resources like there is no tomorrow.
Caplan: Well if people buy and sell using numbers, and indeed have to buy and sell using numbers to avoid catastrophe, why is it invalid to use numbers when we study ABOUT how they buy and sell?
Me: Now you are asking the right question. Reread what he said about using numbers, and you might get it this time.
Cox: And what about Bryan’s proving that Mises had to use a number too, the number of people that make it impossible to calculate?
Me: “Using numbers” is too vague a phrase. What he meant, if you read him in context, is that just because the numbers were a certain way today doesn’t mean they will always be that way. They change all the time. We should be studying why they change, not what they are at a given point in time, and not to ever assume we have nailed down a number, like “the inflation constant”, that will be fixed forever.
Caplan: Well if you can’t use numbers, how do you know socialism will so suffer from the calculation problem as to be infeasible? You’ll need to make a case for that with numbers!
Me: Oddly enough, Robin Cox answers that very question in his next paragraph after quoting you, Bry.
[Cox swells with pride at having got something right in that next paragraph, then turns red when he realizes it means he has contradicted himself].