Reply To: Market Socialism and Economic Calculation:


Mises’s argument about the impossibility of economic calculation, and therefore economizing resource allocation, under central planning refers to socialism, i.e., state ownership of the means of production. If the state owns the means of production, then there can be no trade in the means of production and therefore no prices for the means of production. Without prices, all the central planners have on which to base their allocation decisions is their subjective valuations and the technical facts of production. These are inadequate for economizing decisions since the more efficient arrangement of factors of production cannot be determined by either adding up resources in-kind (e.g., labor hours with machines with materials) or imputing subjective value to the higher-order goods.

Market socialism fails to solve this fundamental problem. “Prices” set by the central-planners in their “currency” are completely arbitrary with respect to entrepreneurial problem, which is anticipating which lines of production and investment for which resource will be allocated today will prove to be justified by satisfying higher-value preferences in the future.

In addition to Mises’s discussion of Market Socialism in Human Action, take a look at Joe Salerno’s epilogue to Mises’s article on Economic Calculation:

In contrast, you seem to be posing a problem of interventionism, not socialism. Mises does not claim that it is impossible in an interventionist state, like France, for there to be economic calculation. If there is some outlet for private property and exchange in a general medium of exchange, then there will be money prices useful for economic calculation.

Alternatively, if all you are saying is that the three problems of socialism (incentives, knowledge, and calculation) are intertwined in applied analysis, then nobody disagrees with you.