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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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othbard: Socialism an d the Calculation Debate
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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7
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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othbard: Socialism an d the Calculation Debate
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