Economic Calculation in the Socialist Commonwealth

One of the most important Austrian works available, and thankfully one of the shorter ones as well--so you, yes you, can read it quickly--is Ludwig von Mises's Economic Calculation in the Socialist Commonwealth. The short argument is that socialism makes rational economy impossible because when there is only one owner of production goods, there is no way to determine efficiency because there are no prices. When it was first published in 1920 the "socialist calculation debate" was still unsettled, but now that international socialism has been discredited, how, you ask, is it still relevant?

Well, in a few ways. First, its original purpose of discrediting socialism is still a worthy bit of theory to ponder. Socialism is almost completely dead as a serious economic idea, but to get the true understanding (beyond the worn-out and stupid "it's good on paper, but...") of why it can't work, read the essay. This is the first step, and good enough in itself.

The next and next most obvious is to show why other government services don't work. Government roads are too expensive, as well as poorly placed, constructed, and maintained, and without a market in roads, they can only accidentally and temporarily be better. Government schools, health programs, and in many countries outside the USA, telecommunications and similar endeavors are likewise hampered.

Another implication, much more radical and much less investigated, is that the government has no way to know how much security to produce either, but that is a subject for another day.

One last implication, also generally overlooked, is one that will come in handy with your left/right-leaning friends. It's a popular fallacy that monopolies are natural in free markets and that the wise, steady hand of government is needed to keep the playing field free of obstruction. But if a company were to grow and grow and swallow up the market, how would it know how to produce efficiently?

Economic Calculation in the Socialist Commonwealth was described by Joseph Salerno earlier this week as the most important essay of the 20th century. I haven't read enough to justify this claim, but I certainly can't rule it out.

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But if a company were to

But if a company were to grow and grow and swallow up the market, how would it know how to produce efficiently?

Not that I don't agree with you on the rest, but I'm not sure that this last argument necessarily plays into our hands. I think that the good many people I know who will always resort to the unfounded fear of monopoly or monopsomy in any given argument about the market would be fine with the idea that monopolies are inefficient.

Where I (we, I suppose) part compay with them is that, financial markets being as efficient as they are, there is really little to fear from monopolies and monopsomies. And their inherent ineffciency is, of course, one of the reasons that, even if all of the history of capitalism were to be trumped and a monopoly actually were to spring up, it never could survive.

But I think that those who cite monopolies as a possible danger of unchecked capitalism (or, as I like to call it, a sensible system) would argue that, despite their inefficiencies, monopolies would spring into existence and remain dominant were it not for government intervention. My argument that monopolies are ineffcient would be met with a mere, "and that's exactly why we have to have government to stop them."