Thursday, August 29, 2019

Why Socialist Calculation Is Always Impossible

08/28/2019

The Austrian school of economics, marked by its unique causal-realist approach, contributed many important insights to the development of economic science. However, regardless of their profound contribution, the Austrian school has been usually charged as “unscientific” due to the lack of mathematical models in the Austrian analysis.

Yet, calculations are being made everywhere in the Austrian framework, since the vital core of their theories is the importance of calculation for economic agents’ actions. Certainly, the concept of the impossibility of a central-planned socialist regime was the most fully elaboration of economic calculations.

The concept of economic calculation was first proposed by Ludwig von Mises in his book Economic Calculation in the Socialist Commonwealth published in 1920. Prior to Mises’s analysis, there were numerous social thinkers who criticized the operation of a socialist economy since for them, such an economy violates the fundamental nature of human beings. Nevertheless, this criticism was purely based on ethical and philosophical grounds.

Mises was one of the first, along with Max Weber and Boris Brutzkus, who independently proposed an entirely different analysis from a purely economic perspective. However, Weber somehow constructed an ideal-type psychological model,1 and from which he eventually came to the conclusion that a socialist economy is “wasteful” and “inefficient".2 On the other hand, Brutzkus dealt only with concrete problems of Russia.3

Yet, “although to some extent Max Weber and Professor Brutzkus share the credit of having pointed out independently the central problem of the economics of socialism, it was the more complete and systematic exposition of Professor Mises.”4 For Mises, such an economy is not just wasteful and inefficient, it is impossible from a purely theoretical point of view.

Mises’s analysis can be summarized as follow..................To Read More

No comments:

Post a Comment