Lesson 3.8: Economic calculation

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  • #18633

    I haven’t fully understood Jeff Herbener argument
    on the impossibility of economic calculation via political decision.

    A simple devil advocate question
    with regard to direct democracy would be
    given a specific issue, say how to best utilise a given piece of land

    If each voter is free to propose his plan
    and each voter is given an equal vote
    than why wouldn’t the outcome be the plan which has the highest value for the greatest amount of people?


    A person voting does not bear the opportunity cost of obtaining the alternative he votes for. A person paying the market price to buy a good does bear the opportunity cost of having his preference satisfied. Whatever made be said in its favor, voting is not an action that demonstrates that a person voting for one alternative values it more relative to the value placed on the alternative given up by a voter who favored it. All voting demonstrates is that each voter values the alternative he votes for more than he himself values the other alternative. But a person who buys a good pays a price that other persons are unwilling to pay and thereby demonstrates that he values the good relative to money more than other persons value the good relative to money. Moreover, a person who votes for an option has his vote nullified by a person voting against his option regardless of how intensely each voter values the option he favors. A person who values something more than another person can, however, outbid him by paying a higher price. Voting does not register the intensity of a person’s preference, bidding prices for goods does.

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