Ive read mises thesis and he basically states that socialism is impossible due to it not having a method of economic caluclation, now i am not a proponent of socialism but i beleive in its possibility. Hypothetically wouldn’t one just be able have each of the “division managers” to produce reports on the status of the quanity they are producing and if they are low on resources,and couldnt prices or distribution ratios be dependent on these reports?
if prices are based on the marginal cost of production how will you know when the manufacturing processes you are using are inefficient? will you have a panel of experts come in and assess efficiency? that doesn’t work. committees and bureacracies don’t produce innovation. thus you wil have a situation analogous to the USSR. Works okay at first, but as time passes the rest of the world leaves you farther and farther behind in innovation.
yes but that dosent mean its “impossible” it just means its unintelligent.
What’s an apple plus an orange?
What Mises essentially is saying is that an economy should distribute goods and resources rationally according to the desires of consumers. To the extent that prices are abolished, and calculation consequently made more difficult, the allocation of resources becomes more and more irrational. When he says that a socialist economy is impossible he’s saying that is impossible for them to allocate resources in line with the demands of consumers.
On this particular aspect of it see Professor Salerno, especially his postscript to the original article of Mises. In fact, he has an excellent lecture in the media section discussion the issue, I highly suggest listening to it.
Well then, let’s have the socialist produce a pencil :
I know a great place for mining graphite! It’s somewhat inlands, so we need to build a railroad to a harbour. But i also happen to know that there is a nice forest between the mine and a good potential harbour. It’s only that the forest there mainly consists of birch trees. Are they useful for railroad sleepers? Hmm. I’ve heard of a professor at the university at Tönningen who, I think, has written about the usefulness of wood in construction works. Lets give him a phone call! Hmm. But how do you actually manufacture copper wires in order to make phones work? Anyway, lets keep it simple here. I’ll just write him a letter and have someone walk it to him. Does anyone here have a pencil …
Then we have the social democrats alternative. They do not really believe in the higher powers of some “Leaders”, but are rather right in their theory, aren’t they, that all knowledge of how making a pencil resides among all the millions of peoples involved in that process!? It’s only that they don’t want the market mechanism to weigh all this information into action. They instead prefer pure democracy.
Therefor the social democrats calls everyone to one single great meeting where there’s opportunity for ALL to just TALK IT THROUGH…
(And did you think that the Monday meetings at work were long and fruitless?)
But i believe if you take his direct thesis which i don’t have in front of me he doesn’t say in, ‘in line with consumers demand’ he just states that it is impossible because of no means of economic calculation, however i agree with your statement above in the sense that it is impossible to allocate resources in line with consumer demands.
Ya I’ve listened to much of salerno’s lectures but his voice is hard to stand lolz, i much prefer reading his work.
Socialism as an economic system, i.e. one in which calculation takes place, is impossible. Trying to instantiate it and failing is not.
Well, i’m not a advocate of socialism at all..however your reasoning is flawed. They would obviously employ a engineer to build a railroad (although their would be a lack of engineers due to no profit motivation) as they would employ a doctor to do surgery. Its inefficient but yes a socialist economy is able to build railroads (Soviet Union) and produce pencils. You make it as if some person who knows nothing about producing a product is in charge of doing so. Yes you would have the central planners at the top who give the orders but they would delegate the orders to the ‘proffessionals’. If someone needed surgery there not going to just hand a random beurcrat a scaple and say here start cutting.
Elaborate, calculation takes place in a economic system just not in a effcient way like in a capitlist economy. It is very possible for a collective socialist economy to exist is just impossible for it to prosper. What are you trying to say i just explained a method socialist calculation, elaborate please.
Calculation requires competition in the market for producers goods and sound money. A socialist economy has neither.
Calculation does not require “competition in the market for producers goods and sound money”, thats simply a method of calculation (arguably the most efficient) that dosent mean that every other method of calcuation, is impossible.
Define:impossible
Not capable of occurring or being accomplished or dealt with
The simple fact that the socialist nations like the Soviet Union existed means that it isn’t impossible, unless he uses a twisted definition of the word.
Arbitrarily using numbers made up by officials is not “economic calculation”. Just twaddle. So it isn’t a matter of efficiency even. It’s mere play with numbers.
Socialism can exist as long as there are other capitalist countries that have an economy with a price structure. Socialism won’t work well by following the price structure of other countries but it won’t fail immediately.
There has never been world socialism. World socialsim would fail fairly quickly.
Its not economic calculation, could you please define that term for me?
Allocation of scarce resources according to consumer preferences.
The Soviet Union copied the production processes used in the market economies, thus allowing it to run somehow irrational industrial processes. For example it had a value-subtracted economy by taking natural resources that had a high value on global markets and transforming it into industrial goods that had less value on global markets.
The simple fact that they would engage in this shows that what they were running was not an economy, but a non-economy. This is what is meant when it is said that a socialist economy is impossible. Different production processes cannot be weighed against one another, and of course against doing nothing at all.
What social-democracy has shown is that socialism is possible only by taxing a market economy to sustain the socialist programs.
I’ve always been a pedant so I was wondering, wasn’t the definition of economic calculation just calculation of costs and benefits in terms of money which makes it easier to form prices due to the common unit of money?
Costs and benefits to whom? Ultimately, the consumer.