Reply To: Market Socialism and Economic Calculation:


Thank you for the response, I seem to remember first learning this point loosely in Klein’s book The Capitalist & The Entrepreneur and appreciating the distinction between the control of resources (as Klein seems to argue the real entrepreneur function is in capital control not in say the firm level control; ie Elon Musks’ investors may be more important from a calculation standpoint than Elon Musk; correct me if I’m off the mark here). I guess where I struggle is in not so much the firm level but the allocation function itself. Say we have allocation managers who use a proxy currency as a unit of account, but they themselves cannot consume the units of account, rather they can only allocate them. So in essence I’m curious more on the possibility or lack thereof not of the internal firm managers playing market, but the intra firm function of resource allocation (in a dynamic sense, not a static sense). So the process by which these proxy entrepreneurs are added or removed is somewhat indirect, but related (I’m thinking like generals in WW2 where there is a performance evaluation and a shifting of rank, or in the case of our managers if they invest a bunch of funds and lose it all they are stripped of rank and back to picking up the garbage). Using a proxy currency we have their control over the allocation of resources based on the profit and loss magnitudes, but the actual ability to consume would be largely removed from those managing the intra firm allocation of resources. Obviously there is one weakness I can think of here and that’s the fact that the majority of our members of society are to however a small degree capitalists so you have many more heads in the game than say with managed intra firm allocation system. But I’m trying to see if and when the impossibility condition breaks down and is supplanted with an incentives issue (ie high profits and innovation are probably gone since like we see with the FDA the incentive is usually higher to not mess up rather than to succeed because the costs outweigh benefits). To add to my final point I assume that the incentive issue itself is a perversion of price since the costs are artificially inflated relative to benefits (or vice versa). So obviously because there is a small calculation issue present, the efficiency of the system is hampered, but seemingly not impossible (I guess it depends on how that’s defined; essentially I’m thinking this works in the same way France works, wasteful of resources, but its citizens are not eating their pets). I trust I might be still missing something here, and again I really appreciate your time on this Dr. Herbener.