Mises Meets the Internet: Revisiting the Calculation Debate in Light of Recent Technology

Abstract

The Austrian position in the socialist calculation debate showed that the information necessary to effective economic calculation requires the use of market prices and cannot be centralized in a way that would make central planning viable. It follows from this conclusion that socialism, in any meaningful sense, is impossible. But new technology leads some to question that claim. Voices from Lange in the 1970s to those more contemporary hold that if only technology could become advanced enough, central planning would work. Given the large technological leaps of the past few decades, the socialist claim has never seemed more plausible. The rise of the Internet of Things provides a glimpse into the now radically connected world in which precise information about minute details of goods is transmitted at the speed of light all around the world. Socialists are now claiming that the very information that the Austrians told them had to be decentralized and conveyed by market prices can now be assimilated by computers. The question of this paper is whether the radically connected Internet Age makes central planning a viable method of economic organization by solving the information problems that have plagued it in the past.The paper argues that central planning still fails and that claims that technology can solve this problem simply miss the point of the Austrian critique. The problem with central planning is not that it is difficult for human brains to deal with lots of information but that it is flawed on a more fundamental level. Central planning, using the Internet or any other means, still cannot account for the crucial role of human action, subjective preferences and rivalry between competing production plans which make market prices the bearers of information necessary to economic calculation. The relevant information is, in Hayek’s words, “essentially dispersed” and loses its usefulness if it is not so. Optimism about central planning because of technological advances misdiagnoses a fundamental economic problem as merely a difficult technical problem.