Reply To: Rothbard and Hayek

#17027
jmherbener
Participant

One difference between the Mises-Rothbard branch and the Wieser-Hayek branch of Austrian economics can be seen in their different arguments against central planning.

The M-R branch argues that entrepreneurs in a market economy can make economizing decisions for society at large by appealing to economic calculation of net income and net worth. Entrepreneurs can appraise the effect their production decisions will have in the future on their enterprises’ net income and net worth. In socialism, the central planners cannot appeal to economic calculation because the state owns all factors of production, therefore, there can be no prices of factors of production, therefore, there can be no calculation of net income and net worth and, therefore, no appraisement of the effect of their decisions in the future.

The W-H branch argues that entrepreneurs can make economizing decisions in a market economy because prices contain all the relevant information condensed into a useable form. The central planners cannot make economizing decisions because they lack the necessary information.

These two different views of the problem of central planning imply different views of the working of a market economy.

Take a look at Hans Hoppe’s article on this point.

http://mises.org/journals/rae/pdf/RAE9_1_13.pdf