ROTHBARD The End of Socialism and the Calculation Debate Revisited.pdf

8/11/2019 ROTHBARD The End of Socialism and the Calculation Debate Revisited.pdf

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R o th b ar d : S o c i a l i s m a n d t he C a l c u la t io n D e b a t e

prices based on genuine profit-seeking exchange

of these means of production. Since the very es

collective ownership of the means of production

would not be able to plan, or to make any sor t

decisions. Its decisions would necessarily be com

chaotic, and therefore th e existence of a socialis

literally impossible (to use a term long ridicule

The Lange-Lerner Solution

In the course of intense discussion throughout t


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othbard Socialism and the Ca lculation Debate

on resource allocation in Mises' view necessari

haphazard basis.

Bergson sharply comments that this "argume

of." Lange and Schumpeter both point out that , a

had shown,

once tastes and techniques are given, the values of th

tion can be determined unambiguously by imputatio

vention of a market process. The Board of Supermen

how to allocate resources so as t assure the optimu

simply have t solve the equations of Pareto and ~ ar


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6

The

eview

of Aus trian E

absurdly fictional Walrasian auctioneer, brin

rium rapidly by trial and error.

Set aside the obvious absurdity of trusting a c

monopoly to act somehow as if i t were in perfect co

of itself. Another grievous flaw in the Lange m

general equilibrium, a world of certainty where th

driving force of entrepreneurship, can somehow b

real world. The actual world is one not of chang

incessant change and systemic uncertainty. Becau

the capitalist entrepreneur, who stakes assets and


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othbard: Socialism an d the Calculation Debate

decide what the stocks of the various consumer g

there are a huge number of markets where the

only be both buyer and seller for each transacti

monopoly, intra-state transactions permeate the

of a n advanced economy-the complex lattice-

markets. And here i s precisely where calculation

reigns, and there is no way for rationality to intr

number of decisions on the allocation of prices a

tion in the structure of capital goods.


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othbard: Socialism and the Calculation Debate

adds, it is vain to cite the honest corporatio

well-tried efficiency. Those who confuse entrep

agement close their eyes to the economic proble

system i s not a managerial system; i t is a n entre

But here, Mises triumphantly concludes, no

ever suggested preserving or carrying over, much

importance of, the specifically entrepreneurial fun

Nobody has ever suggested that the socialist com

invite the promoters and speculators to continue

and then deliver their profits to the common chest


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6

The Review

of Au str ian E

of Mises's answer, which

I

realized recently w

great meri ts of the Misesian, as compared to the

of the socialist calculation problem.

For Mises, in short, the key to the capitalist

its successful functioning is the entrepreneur

decisionmaking of private owners and investors.

cally

not

the more minor decisions made by corpo

a framework already set by entrepreneurs and the

i t is obvious that Lange, Lerner, and the other ma

envisioned the relatively lesser managerial decisio


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Mises s Rebuttal:

Valuation and Monetary Appraisement

In his original

1920

article, Mises emphasized

gives up the conception of a freely established

goods of a higher order, rational production

impossible. Mises then sta tes , prophetically:

One may anticipate the nature of the future soci

will be hundreds and thousands of factories in ope

these will be producing wares ready for use; in th


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othbard: Socialism an d the ~ a lc u la t i o n ebate

The Theory of Money an d Cr ed it

(1912). In the c

integration of monetary theory an d micro mar

Mises was one of the very first to realize tha t s

of the consumers (and of laborers) on the marke

and a re in no way measurable. But market pric

measurable in terms of money, and market mone

into cardinal comparability and calculation (e.g.

five times as much as a $2 loaf of breadLZ3Bu t

this insight meant i t was absurd t say (as Sch

th e market imputes the values of consumer goo


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66

The Review of Au strian

E

construing Mises's argument or by consciously t

ing the crucial terms of the debate.

I t is no accident, in short, th a t Hayek and the

Mises's term impossible as embarrassingly ext

For Hayek, the major problem for the socialist p

lack of knowledge. Without a market, the socialis

no means of knowing the value-scales of the cons

of resources or available technologies. The capit

Hayek, a valuable means of disseminating knowle

ual to another through the pricing signals of the


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othbard: Socia l ism an d the Calculat ion Debate

which the faculty of understanding is used to asse

structure of price relationships which correspond

constellation of economic data.Nor are anticipated

of knowledge; they are instruments of economi

economic calculation itself i s not the means of acq

but the very prerequisite of rational action within

social division of labor. It provides individuals, wha

ment of knowledge, the indispensable tool for a

grasp and comparison of the means and ends of s

In a recent article, Professor Israel Kirzner a


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othbard: Socialism a nd the Calculation Debate

study of the

1929

depression, The Great Depress

Mises, that the planners could determine consu

allowing a market in consumer goods, Robbins

the socialist planners would also have to know

cies of the factors of production in producing all

tives. Robbins then unfortunately added:

On paper we can conceive this problem to be sol

mathematical calculations. We can imagine table

expressing the consumers demands And we can

information giving us the productivity which


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7

The Review of Austrian E

very te rms of the problem. Adopting his qua

approach, and ignoring th e crucial Misesian prob

absence of any market in land or capital, Lang

there is no need for planners to worry about th

they would be solved by the socialist market :

Neither would the Central Planning Board have to

thousands or millions of equations. The only

would have to be solvedn would be those of the c

managers of production plants. These are exactl

tions which ar e solved in the present econom


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Rothbard: Socialism a n d the Calculation Debate

against his own quasi-decentralized market

Lange, in 1958, revealed that "in Poland, we h

whether such a period of highly centralized pl

ment was historical necessity or a great political

I hold the view that i t was a historical necessity

Why? Lange now claimed:

(a)that the "very process of the social revolut

one social system and establishes another requ

posal of resources by the new revolutionary sta

centralized management and planning."


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he eview of Au strian E

Lange's naive enthusiasm for the magical pla

computer in i ts early days can only be considere

economists and the people in the socialist countrie

economies go inexorably from bad to far worse

computers. Lange apparently never became famili

adage,

GIGO

( garbage in, garbage out ). Nor co

familiar with the recent estimate of a top Soviet

assuming that the planning board and its compu

correct data,

it

would take even the current gene

30,000 years to process the information and alloc


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othbard Socialism an d the Calculation Debate

In the first place, this triumphal conclusion

since the economies of the Soviet Union and th

countries have now manifestly broken down. A

out that the Soviet GNP and production figure

CIA, and other Sovietologists have been takin

decades have been nothing but a pack of lies, des

the United States, but the Soviet managers' ow

now, Western Sovietologists are reluctant to bel

omists who are finally trying to tell them th

alleged and much revered data.


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The Review of A u str ia n E

indispensable guidelines for the pricing and a

resources. 'As Mises pointed out:

People d id not rea l ize th a t these were not i so lat

They were ope ra t ing in a n env i ronm ent in whic

s t i l l worked. They could resor t to economic c

ground of th e pr ices es tabl i s hed abroad . W i tho

pr ices the i r ac t ions would ha ve been a im less a

because they w ere able to re fe r to these fore ign

ab le to cal cu la t e , t o keep books, a nd to p repa re

abou t p l ans .40


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recognize the importance of an adequate system

ing.

.

. the merit of having caused the sociali

problem systematically belongs entirely to Prof

then went on to taunt Mises:

Both a s an expression of recognition for the grea

by him and as a memento of the prime importance

accounting, a statue of Professor Mises ought to o

place in the great hall of the Ministry of Socializati

Planning Board of the socialist state .


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The eview of A us tria n E

thing seems certain: there will be no statues ere

in Cracow or Warsaw. It is hard to see how even th

and the HegeIian dialectic can make Lange out t

important contributor to the laissez-faire Poli

future. Perhaps the closet approach was a bi

Eastern Europe during the revolutionary year of

can be defined as the longest route from capitali

Documents

ROTHBARD The End of Socialism and the Calculation Debate Revisited.pdf