Economic calculation problem - Revision history

182.253.48.67 at 04:02, 9 December 2013

2013-12-09T04:02:13Z

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	In any economy more complex than the Crusoe or primitive family level, the socialist planning board would simply not know what to do, or how to answer any of these vital questions. Developing the momentous concept of calculation, Mises pointed out that the planning board could not answer these questions because socialism would lack the indispensable tool that private entrepreneurs use to appraise and calculate: the existence of a market in the means of production, a market that brings about money prices based on genuine profit-seeking exchanges by private owners of these means of production. Since the very essence of socialism is collective ownership of the means of production, the planning board would not be able to plan, or to make any sort of rational economic decisions. Its decisions would necessarily be completely arbitrary and chaotic, and therefore the existence of a socialist planned economy is literally "impossible" (to use a term long ridiculed by Mises's critics).		In any economy more complex than the Crusoe or primitive family level, the socialist planning board would simply not know what to do, or how to answer any of these vital questions. Developing the momentous concept of calculation, Mises pointed out that the planning board could not answer these questions because socialism would lack the indispensable tool that private entrepreneurs use to appraise and calculate: the existence of a market in the means of production, a market that brings about money prices based on genuine profit-seeking exchanges by private owners of these means of production. Since the very essence of socialism is collective ownership of the means of production, the planning board would not be able to plan, or to make any sort of rational economic decisions. Its decisions would necessarily be completely arbitrary and chaotic, and therefore the existence of a socialist planned economy is literally "impossible" (to use a term long ridiculed by Mises's critics).
			[http://www.grosir-kosmetik.com/62-glutera.html Glutera], [http://www.grosir-kosmetik.com/63-been-pink-beauty-series.html Been pink]

	In the course of intense discussion throughout the 1920s and 1930s, the socialist economists were honest enough to take Mises's criticism seriously, and to throw in the towel on most traditional socialist programs: in particular, the original communist vision that workers, not needing such institutions as bourgeois money fetishism, would simply produce and place their products on some vast socialist heap, with everyone simply taking from that heap "according to his needs."		In the course of intense discussion throughout the 1920s and 1930s, the socialist economists were honest enough to take Mises's criticism seriously, and to throw in the towel on most traditional socialist programs: in particular, the original communist vision that workers, not needing such institutions as bourgeois money fetishism, would simply produce and place their products on some vast socialist heap, with everyone simply taking from that heap "according to his needs."

182.253.48.67: Undo revision 24380 by Nathan Larson (talk)

2013-12-09T03:56:42Z

Undo revision 24380 by Nathan Larson (talk)

← Older revision		Revision as of 03:56, 9 December 2013
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	[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.		[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.
	~~[http://www.grosir-kosmetik.com/62-glutera.html Glutera], [http://www.grosir-kosmetik.com/63-been-pink-beauty-series.html Been pink]~~

	==Argument in detail==		==Argument in detail==

FormerContributor-78162cb3: Reverted edits by 187.60.35.162 (talk) to last revision by 182.253.52.3

2013-12-08T06:03:19Z

Reverted edits by 187.60.35.162 (talk) to last revision by 182.253.52.3

← Older revision		Revision as of 06:03, 8 December 2013
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	[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.		[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.
			[http://www.grosir-kosmetik.com/62-glutera.html Glutera], [http://www.grosir-kosmetik.com/63-been-pink-beauty-series.html Been pink]

	==Argument in detail==		==Argument in detail==

187.60.35.162: /* Summary */

2013-12-08T03:17:42Z

Summary

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	[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.		[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.
	~~[http://www.grosir-kosmetik.com/62-glutera.html Glutera], [http://www.grosir-kosmetik.com/63-been-pink-beauty-series.html Been pink]~~

	==Argument in detail==		==Argument in detail==

182.253.52.3 at 09:21, 6 December 2013

2013-12-06T09:21:32Z

← Older revision		Revision as of 09:21, 6 December 2013
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	[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.		[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.
			[http://www.grosir-kosmetik.com/62-glutera.html Glutera], [http://www.grosir-kosmetik.com/63-been-pink-beauty-series.html Been pink]

	==Argument in detail==		==Argument in detail==

Jérôme Alexandre: Bibliography

2013-03-05T08:26:30Z

Bibliography

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 <references/>
 </div>
 ==Links==
 *[http://mises.org/humanaction/chap26sec1.asp The Impossibility of Economic Calculation Under Socialism] by [[Ludwig von Mises]]
 *[http://mises.org/daily/2401 The End of Socialism and the Calculation Debate Revisited] by [[Murray N. Rothbard]]
 *[http://mises.org/journals/scholar/mackenzie10.pdf Oskar Lange and the Impossibility of Economic Calculation] by [[D.W. MacKenzie]]
 *[http://mises.org/journals/scholar/Boettke.pdf Socialism: Still Impossible After All These Years] by [[Peter J. Boettke]] and Peter T. Leeson
 *[http://mises.org/misesreview_detail.asp?control=267 Must Economies Be Rational?] by [[David Gordon]]
 *[http://mises.org/media/5220 Calculation and Socialism] by [[Joseph T. Salerno]], Recorded July 27, 2010 in Auburn, Alabama. Includes an introduction by Mark Thornton (1:00:38).

Pestergaines: More on the calculation problem, restructured.

2012-01-26T12:06:24Z

More on the calculation problem, restructured.

Show changes

Pesterbot: /* Links */External Links to Links, replaced: ==External links== → ==Links==

2011-06-21T18:40:29Z

Links: External Links to Links, replaced: ==External links== → ==Links==

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	</div>		</div>

	==~~External links~~==		==Links==
	*[http://mises.org/humanaction/chap26sec1.asp The Impossibility of Economic Calculation Under Socialism] by [[Ludwig von Mises]]		*[http://mises.org/humanaction/chap26sec1.asp The Impossibility of Economic Calculation Under Socialism] by [[Ludwig von Mises]]
	*[http://www.missouri.edu/~econ4mp/Econ_4345/syl_articles/Hayek_The%20Use%20of%20Knowledge%20in%20Society%20(F.A.pdf The Use of Knowledge in Society] by [[Friedrich Hayek]]		*[http://www.missouri.edu/~econ4mp/Econ_4345/syl_articles/Hayek_The%20Use%20of%20Knowledge%20in%20Society%20(F.A.pdf The Use of Knowledge in Society] by [[Friedrich Hayek]]

Forgottenman: cleanup

2010-11-24T17:36:43Z

cleanup

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			{{Wikipedia text\|Economic_calculation_problem\|390005384}}
	The '''economic calculation problem''' is a criticism of central [[economic planning]]. It was first proposed by [[Ludwig von Mises]] in 1920 and later expounded by [[Friedrich Hayek]].<ref name="Mises">{{cite book		The '''economic calculation problem''' is a criticism of central [[economic planning]]. It was first proposed by [[Ludwig von Mises]] in 1920 and later expounded by [[Friedrich Hayek]].<ref name="Mises">{{cite book
	\|title= Economic calculation in the Socialist Commonwealth		\|title= Economic calculation in the Socialist Commonwealth
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	{{DEFAULTSORT:Economic Calculation Problem}}		{{DEFAULTSORT:Economic Calculation Problem}}
	~~[[Category:History of economic thought]]~~		[[Category:Austrian School of Economics]]
	[[Category:Austrian School]]		[[Category:Economic concepts]]
	[[Category:Economic ~~theories]]~~
	~~[[Category:Economic planning]]~~
	~~[[Category:Socialism~~]]

Bkmarcus at 17:23, 24 November 2010

2010-11-24T17:23:38Z

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	\|publisher= [[Ludwig von Mises Institute]]		\|publisher= [[Ludwig von Mises Institute]]
	\|url= http://mises.org/pdf/econcalc.pdf		\|url= http://mises.org/pdf/econcalc.pdf
	}}</ref><ref>F. A. Hayek, (1935), "The Nature and History of the Problem" and "The Present State of the Debate," om in F. A. Hayek, ed. ''Collectivist Economic Planning'', pp. 1-40, 201-43.</ref> The problem referred to is that of how to distribute resources [[Rational choice theory\|rationally]] in an economy. The [[free market]] solution is the [[price mechanism]], wherein people individually have the ability to decide how a good or service should be distributed based on their willingness to give money for it. The price conveys embedded information about the [[Supply and demand\|abundance of resources as well as their desirability]] which in turn allows, on the basis of individual consensual decisions, corrections that prevent [[Economic shortage\|shortages]] and [[Economic surplus\|surpluses]]; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources. Those who agree with this criticism argue it is a refutation of [[socialism]] and that it shows that a [[socialist]] [[planned economy]] could never work. The debate raged in the 1920s and 1930s, and that specific period of the debate has come to be known by [[economic historian]]s as ''The Socialist Calculation Debate.''~~{{Citation needed\|date=October 2010}}~~		}}</ref><ref>F. A. Hayek, (1935), "The Nature and History of the Problem" and "The Present State of the Debate," om in F. A. Hayek, ed. ''Collectivist Economic Planning'', pp. 1-40, 201-43.</ref> The problem referred to is that of how to distribute resources [[Rational choice theory\|rationally]] in an economy. The [[free market]] solution is the [[price mechanism]], wherein people individually have the ability to decide how a good or service should be distributed based on their willingness to give money for it. The price conveys embedded information about the [[Supply and demand\|abundance of resources as well as their desirability]] which in turn allows, on the basis of individual consensual decisions, corrections that prevent [[Economic shortage\|shortages]] and [[Economic surplus\|surpluses]]; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources. Those who agree with this criticism argue it is a refutation of [[socialism]] and that it shows that a [[socialist]] [[planned economy]] could never work. The debate raged in the 1920s and 1930s, and that specific period of the debate has come to be known by [[economic historian]]s as ''The Socialist Calculation Debate.''

	[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.		[[Ludwig von Mises]] argued in a famous 1920 article "Economic Calculation in the Socialist Commonwealth" that the pricing systems in socialist economies were necessarily deficient because if government owned or controlled the [[means of production]], then no rational prices could be obtained for [[capital goods]] as they were merely internal transfers of goods in a socialist system and not "objects of exchange," unlike final goods. Therefore, they were unpriced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently.<ref name="Mises" /> This led him to declare "...that rational economic activity is impossible in a socialist [[commonwealth]]."<ref name="Mises" /> Mises developed his critique of socialism more completely in his 1922 book ''Socialism, an Economic and Sociological Analysis''.