Socialist Calculation Debate Research Articles

Entrepreneurship and corporate governance

In his “closing salvo” in the socialist calculation debate, Mises (1949, pp. 705–10) argued that the market socialists failed to understand the role of financial markets in an industrial economy. Even with markets for consumer goods, he explained, socialism would fail because it substituted collective ownership of the means of production for private capital markets. Through these markets, owners of financial capital decide which firms, and which industries, receive resources to make consumer goods. In a modern economy, most production takes place in publicly held corporations. Of prime importance, then, is the problem of corporate governance: How do owners of financial capital structure their agreements with those who receive that capital, to prevent its misuse? Unfortunately, there exists little research in this area from an Austrian perspective. In this article, I focus on the financial-market entrepreneur—what Rothbard (1962, 1985) calls the capitalist–entrepreneur—to outline some features of an Austrian theory of corporate governance. I begin by reviewing the traditional, production-function theory of the firm and suggesting two alternative perspectives: that of the entrepreneur and that of the capitalist. I next discuss the Coasian, or “contractual” approach to the firm and argue that it provides a useful organizing framework for Austrian research on the firm. The subsequent section proposes entrepreneurship and economic calculation as building blocks for an Austrian theory of the firm. Finally, after a brief review of capital-market behavior and the disciplinary role of takeovers, I outline four areas for Austrian research in corporate governance: firms as investments, internal capital markets, comparative corporate governance, and financiers as entrepreneurs.

社会主義経済計算論争の展望、分裂か収束か

社会主義経済計算論争の展望、分裂か収束か

Socialism against markets? A critique of two recent proposals

The debate over the feasibility of socialism has lasted for much of the twentieth century. This essay evaluates two important recent proposals for systems of socialist planning in which markets are given merely a marginal role. Beforehand, some of the key theoretical issues are placed in the context of the ‘socialist calculation debate’ that lasted from the 1920s to the 1940s. It is argued that the Austrian critics of centralist socialism rightly focused on questions of information and knowledge, and similar considerations also undermine the two recent proposals under review. However, a full appreciation of the role of learning in a knowledge-intensive economy also challenges some of the presuppositions of market individualism.

社会主義経済計算論争の発展

社会主義経済計算論争の発展

The economics calculation debate: lessons for socialists

This paper summarizes the standard account of the economic calculation debate, the modern Austrian reinterpretation of the debate based on the centrality of tacit knowledge and discovery, and a neglected third strand in the historical debate, Dobb's insistence on the uncertainty associated with atomistic decision making and the need for ex ante planning. It then draws some lessons for socialists from the debate and considers a possible market socialist response to the modern Austrian challenge. The paper ends by outlining a model of participatory planning that incorporates both the modern Austrians' insight into the importance of tacit knowledge and Dobb's insistence on ex ante coordination. (c) 1996 Academic Press Limited Copyright 1996 by Oxford University Press.

Dr. Pangloss goes to market

Abstract David Ramsay Steele's From Marx to Mises argues correctly that the standard account of the economic calculation debate is a misrepresentation. Mises and Hayek were not bested by Lange and Taylor. However, it is not true, as Steele claims, that socialists have yet to face the Misesian challenge, nor that the debate over socialist calculation sheds much light on the recent collapse of communism. Steele's critiques of market socialism and worker self‐management and his treatment of Marx are, moreover, deficient, as a consequence of his “Libertarian Panglossism.” Tout est an mieux . . . dans ce meilleur des mondes possibles.

The Coordination of Investments in a Market Economy: Comments on a Revitalized Marxian Theme

In a recent article in this journal, Fikret Adaman and Pat Devine argued that one of the important reasons for the current crisis of confidence confronting socialists today is the absence of any convincing model of allocation. In their attempt to take steps towards such a model - centred around what they call participatory democratic planning - one that transcends the simplicities of earlier market schemes. Adaman and Devine provide a useful and interesting review of the so-called socialist calculation debate.

Socialism: A property or knowledge problem?

In a series of recent articles in The Review of Austrian Economics, Joseph Salerno began to de-homogenize the often conflated economic and social theories of Ludwig von Mises and Friedrich A. Hayek. In particular, he has shown that their views on socialism are distinctly different, and he has argued in effect that Mises's original argument in the so-called socialist calculation debate was correct all along and was also the final word, whereas Hayek's distinct contribution to the debate was fallacious from the outset, and merely added confusion. The following note will provide additional support to Salerno's thesis. Mises's well-known calculation argument states this: If there is no private property in land and other production factors, then there can also be no market prices for them. Hence, economic calculation, i.e., the comparison, in light of current prices, of anticipated revenue, and expected cost expressed in terms of a common medium of exchange-money-(thus permitting cardinal accounting operations), is literally impossible. Therefore, socialism's fatal error is the absence of private property in land and production factors, and, by implication, the absence of economic calculation. For Hayek, socialism's problem is not a lack of property but a lack of knowledge. His distinctly own thesis is altogether different from Mises's.' For Hayek, the ultimate flaw of socialism is the fact that knowledge, in particular "the knowledge of the

From Marx to Mises: post-capitalist society and the challenge of economic calculation

This contribution to economic philosophy considers Marx's pronouncements on the organization of future society, and in this context re-examines the long-lasting debate triggered by Mises's argument that modern industrial production requires a system of spontaneously-formed market prices. In an undogmatic, non-technical treatment, Steele contends that both the Marxian conception of future society and the Misesian argument against its feasibility have frequently been misunderstood. The work scrutinizes the replies to Mises, and explores some of the wider issues raised by the economic calculation debate.

Knowledge, values, and the social order in Hayek's oeuvre

The epistemological basis of Hayek's moral and political philosophy is outlined. The Vienna of Austrian Economics, of Logical Empiricism, and its main critic Popper, form the background. Popper's methodology of research has been generalized to Evolutionary Epistemology. The concept of spontaneous order is central to Hayek's theory of cultural evolution. Attention is drawn to parallels with synergetics—how order emerges out of chaos. Property breeds order, but not the other way round. The market is logically and, hence, historically prior to any proto-state authority. Hayek's key questions are: How to use knowledge?, and How to elicit it? Existing dispersed (local) knowledge constitutes an epistemic resource, a sort of wealth. Knowledge is elicited in the market process, be it a commercial market or the “market of ideas.” The competitive market functions as a discovery and selection mechanism. The only viable way of co-locating relevant knowledge and decision rights is vesting decision responsibility in the owners of knowledge through the free, private market. The so-called “socialist calculation debate” is a spin-off of this insight. In the evolution of humankind, two rule systems have evolved: the moral system that stabilizes the face-to-face group and the system of abstract rules that makes possible social life in the large, anonymous society. Hayek's philosophy of the free society is based upon these theories, including his descriptive ethics. Apparently, in the long run, a free society cannot survive without a deontic moral system. This article argues that Hayek's philosophy is completed and enriched by Jasay's seminal work.

Calculation, complexity and planning: the socialist calculation debate once again

This article offers a reassessment of the socialist calulation debate, and examines the extent to which the conclusions of that debate must be modified in the light of the subsequent development of the theory and technology of computation. Following an introduction to the two main perspectives on the debate which have been offered to date, we examine the classic case mounted by von Mises against the possibility of rational economic calculation under socialism. We discuss the response given by Oskar Lange, along with the counterarguments to Lange from the Austrian point of view. Finally we present what we call the ‘absent reponse’, namely a reassertion of the classic Marxian argument for economic calculation in terms of labour time. We argue that labour-time calculation is defensible as a rational procedure, when supplemented by algorithms which allow consumer choice to guide the allocation of resources, and that such calculation is now technically feasible with the type of computing machinery currently available in the west and with a careful choice of efficient algorithms. Our argument cuts against recent discussions of economic planning which continue to assert that the task is of hopeless complexity. In the main, socialist production might only appear rationally realizable if it provided an objectively recognizable unit of value, which would allow for economic calculation in an economy where neither money nor exchange were present. And only labour can conceivably be considered as such (Ludwig von Mises, 1935: 116).

The institutional framework and agricultural development: Implications of the economic calculation debate

Perestroika and other central planning initiatives ignore or heavily discount the importance of the political and institutional framework. In the economic calculation debate that occurred more than 50 years ago, the issue was whether rational economic calculation is possible in a centrally directed economy. This debate is summarized and the implications discussed for the transition of socialist economies to market systems in Eastern Europe. It is shown why collectivism will predictably fail as an efficient means of coordinating economic activity and it is argued that the institutional framework warrants more attention by agricultural economists. Copyright 1992 by Oxford University Press.

Reviving the Socialist Calculation Debate: A Defense of Hayek Against Lange

The socialist calculation debate is a debate about whether rational economic decisions can be made without markets, or without markets in production goods. Though this debate has been simmering in economics for over 65 years, most philosophers have ignored it. This may be because they are unaware of the debate, or perhaps it is because they have absorbed the conventional view that one side decisively won. This is the side represented by economists such as Oskar Lange and Fred Taylor who, in opposition to free-market economists like Fredrich Hayek, allegedly showed that their version of market socialism is, in principle, as efficient as capitalism.

The economic calculation debate: Lessons for Austrians

The economic calculation debate: Lessons for Austrians

Rivalry and central planning: the socialist calculation debate reconsidered

<i>Rivalry and central planning: the socialist calculation debate reconsidered</i>

Some Ethical Implications for Capitalism of the Socialist Calculation Debate

The debate that raged in the interwar period between the Austrian economists (who argued the thesis that under socialism it would not be possible to engage in rational economic calculation) and socialist economists (who rejected that thesis) was, narrowly conceived, a debate in positive economics. What was being discussed was certainly not the morality of capitalism or of socialism. Nor, strictly speaking, was the debate even about society's economic well-being under socialism; it concerned the ability of central planners to make decisions that take appropriate account of relevant resource scarcities, in the light of consumer preference rankings. To be sure, the extraordinary interest which surrounded the debate and the passions that lurked barely below its surface testified to the powerful implications of the debate for crucial issues in welfare economics. The Austrians were not merely exploring the economies of socialism; they were in effect demonstrating that, as an economic system attempting to serve the needs of its citizens, socialism must inevitably fail. But, even if the debate is interpreted in its broadest terms, as a debate in welfare economics, it represented a sharp break widi traditional polemics relating to the socialism-capitalism issue. Traditionally the arguments for or against capitalism had, until 1920, been deeply involved in ediical questions. Mises's 1920 challenge to socialism, in contrast, was explicit in making no attempt to address any claims concerning the alleged moral superiority of socialism. He simply argued that, as an economic system, socialism was inherendy incapable of fulfilling the objectives of its proponents; central planners are unable to plan centrally.

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered.

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered.

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered

This study represents a serious challenge to conventional thinking in contemporary comparative systems, and the economics of socialism. It disputes the commonly accepted view of both the nature of the 'socialist calculation debate' of the 1930s and the lessons to be derived from it. Whereas many socialist and capitalist participants to the debate tended to talk in polar terms of central planning versus the market, the chief result of the whole controversy has been that the Neoclassical 'market-socialist' position is usually taken to represent a successful synthesis of planning with markets, a synthesis which almost completely dominates contemporary work in comparative economic systems. The author argues in fact that the famous debate has been largely misunderstood. His revisionist interpretation argues that it can no longer be viewed as a dated battle between extreme positions that have now become comfortably reconciled. Rather, the lesson is that planning and markets are fundamentally alternative co-ordination mechanisms and that the attempt to combine them tends to subvert the operation of each.

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. By Don Lavoie (New York: Cambridge University Press, 1985. 192p. $34.50).

Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered. By Don Lavoie (New York: Cambridge University Press, 1985. 192p. $34.50).