Its a dumb question. Maybe I’m derping.
When we say “the market makes an economic use of resources”, what does the word “economic” mean?
In that sense it’s probably derived from the word ‘economize’ (or vice versa), or coordinated within the means-end framework of the individual; i.e. the economization of resources (means) towards the achievement of given ends.
So wouldn’t it make sense to say that communist planning is “economic” in the sense that it is the economization of resources towards the achievement of the planner’s end?
I’m just slightly bothered because I see “market = economic = good”. I’m not necessarily convinced of any of those links.
What someone uses the word in a context like that they’re usually using it as a euphemism for “efficient” or “thrifty” or “frugal”. Like this:
“Oh, that’s the high-end model…it’s pretty expensive. We have a more economical alternative over here…”
It sounds a lot more intelligent and when you use a “smart people word” like “economical”. Plus you avoid directly calling someone “cheap.”
So wouldn’t it make sense to say that communist planning is “economic” in the sense that it is the economization of resources towards the achievement of the planner’s end?
To a degree yes, but this is generally referred to as rationing. I think some people refer to economization as rationing; I used to, and still do sometimes. But, rationing is done outside the coordinative macroeconomic framework of capitalism.
Jonathan is right. Another way of saying it is that “economic” in this sense means that there is some kind of linkage between the actual allocation of resources and the priorities of individual members of society.
Nearly all advocates of socialism allege that the planning is done for the sake of the ends, not just of the planner, but of the members of society. It’s not purported to be despotism for the despot’s sake.
When used in the adjectival sense, economic/al (as in “using a car instead of a horse was more economic/al”), it means good value for a low price.
When used in the noun sense, economic (as in “economic factors lead to the decay of Rome”), it means pertaining to the economy.
So yes, socialism is an “economic” system that many socialists find more “economic/al” than capitalism.
Well, we’d only know something is more economical if it actually existed, Laotzu.
Nobody says an unsold car has good value for money, because we don’t even know what price it was for which it was sold.
Yup
But then that means that command economies ARE “economic” since they reflect a link between resource allocation and the priorities of (some) individuals.
Is the Austrian claim that a market economy is universally economic? I can agree that the market allocates resources using individual priorities as inputs. But this point seems tautological…
Again, it keeps bugging me that free market advocates have this line where they say that "the market is economic"like that’s some sort of victory condition. But whether or not universal economics is good depends on your political philosophy.
The Austrian claim is that capitalism is a social division of labor in which resources are allocated in a way linked to the priorities of the members of the society. Look at how many times “social division of labor” occurs in Human Action.
Furthermore, socialism is advocated as a rival social division of labor to capitalism. The priorities of the planning czar under socialism as a social division of labor are not the ultimate priorities. They are mediate priorities established in an effort to provide for the people according to their relative wants (priorities).
What Mises proved is that the planning czar is entirely impotent in this regard. He proved that socialism, as a rational system of social production and provision, is impossible.
I suggest reading Israel Kirzner’s The Economic Point of View; it might help answer your question more comprehensively. He covers the concept of “economizing man”.
It would have to be all the members of society. If it were just some then it means that central planning is compatible with capitalism. Or am I misreading you here?
Err, socialism is rational in that it is purposeful blablabla. Socialism is “impossible” in that it cannot be universally “economic”, where “economic” means incorporating the priorities of individuals.
But isn’t there a hidden provision here? When when we say “the priorities of individuals”, we really mean their priorities expressed through property rights. But priorities can be expressed outside of property rights… For example the state will shoot me if I rebel, so we can see that I prefer to live than fight the state even though I have a gun in my face.
Thanks Jonathan. I’ll look into it.
Err, socialism is rational in that it is purposeful blablabla. Socialism is “impossible” in that it cannot be universally “economic”, where “economic” means incorporating the priorities of individuals.
Socialism is ‘impossible’ in the sense that it cannot efficiently allocate resources. In other words, socialism is not a viable division of labor. Socialism is bound to collapse, because of the inherent economic problems it suffers from.
When when we say “the priorities of individuals”, we really mean their priorities expressed through property rights. But priorities can be expressed outside of property rights… For example the state will shoot me if I rebel, so we can see that I prefer to live than fight the state even though I have a gun in my face.
I don’t think it’s worth bringing in property rights. The choices that individuals have to choose from will always be limited, whether you live in a purely voluntary society or a purely coercive society. The fact is, though, that over time individuals act to widen their choices, because it’s only by doing so that they can better satisfy their preferred ends (for example, if a specific end cannot be attained because of some restriction, it may be that the individual will act in such a way to lift that restriction). This type of action led to the establishment of property rights, in my opinion; so, it’s just a characteristic of how humans act to increase benefits and decrease costs.
It is an axiomatic truth (a category of action by Mises) that people prefer their more urgent wants to be satisfied with a priority compared to their less urgent wants. If your political philosophy restrains individuals from disposing with their property the way they would dispose (without violating another actor’s property rights) of it if you did not intervene, then you are making them relatively less wealthier (resources are allocated and utilised comparatively less economically). You might say that libertarians suggest ethics that also restrain individuals from disposing of their property in some particular ways, like, for example, using their kitchen knife to murder their wife, which also makes them subjectively less gratified (the happiness the individual would experience from the death of his wife). Yes, but his wife is dead, which diminishesh her gratification to nil for infinity. The point is that individual’s enrichment that diminishes someone else’s gratification is making one guy relatively more wealthier on the expense of another guy who is now worse off. This is important in the individual co-existence (divison of labour) framework. And remember that property rights are a priori presumed before any economic act be performed and consequently economic theory be developed. So saying that property rights do not matter, so my act of enrichment that diminishes someone else’s gratification is insignicant is inconsequential.
Capitalism is linked to the priorities of all the members of society. Even the priorities of panhandlers and children effect demand via their effects on the actions of producers.
No, we mean priorities period. If a planning czar could magically arrange production so that it occurred exactly it would have been arranged in a market economy, but completely according to his commands, there would be no property rights in the means of production, but there would be rationality: resources would be allocated in a way advantageous according the wants of individuals in society. There wouldn’t be mountains of mechanical pencil lead with no mechanical pencils to put them in. There wouldn’t be mountains of polka CDs nobody wanted. Etc.
It is worth it a billion times. Property rights is implied in the very act of exchange between two parties. There cannot be any exchange without a de facto institution of property rights. It is logically impossible.
It is the other way around. First there must be recognized property rights , only then can there be exchange. Later on as the division of labor expands and society becomes more “civilized”,it may become economically expedient to develop more sophisticated and formal institutions of property rights, such as one that may be formally embedded in legal codes that may be demanded in order to facilitate exchange.
No there wouldn’t. Just because its the same superficial outcome does not mean its “economic”. There is no link to the priorities of all individuals. Its just kind of happenstance.
But if you just mean priorities period, then why aren’t ALL possible systems economic? After all, my priorities are incorporated into the statist system because my priorities still matter even though there’s aggression.
It is not just about priorities (and I don’t think that’s what he means). We may regard the priorities as settled (as Mises would say it). But there is the embarrassing situation that the planner finds himself in; He cannot calculate the costs of any of the endless possibility of choices between different means, and therefore cannot compare between them.