Socialist Calculation Research Articles

Rethinking economic planning

The special issue ‘Rethinking Economic Planning’ contributes to the emerging literature on economic planning in the age of digitalization and climate crisis. This introduction will first situate the new planning debate in the context of the historical socialist calculation debate. We will then provide an overview of the current literature on democratic economic planning, elaborate on the contributions of this special issue and its individual papers against this background, and summarize the six texts. We close with a brief section on gaps in the debate.

Cybersocialism and the Future of the Socialist Calculation Debate

In the long running debate about the desirability and feasibility of a planned socialist economy, Austrian economists proclaim victory. Drawing from Mises and Hayek, they stress that the problem of deciding the most economic methods for producing goods and services is not simply, as some early socialist responses suggested, a ‘computational’ one but is rather epistemological. Hence, they reject recent ‘cybersocialist’ claims that developments in computational technology offer potential for addressing the ‘socialist calculation problem’ famously formulated by Mises, long before the advent of computer technology. Yet this theoretical claim by Austrians hinges more than is recognised upon the capacity of rapidly evolving computational technologies and their potential applications. We highlight the need to re-appraise Austrian conclusions, attending closely to the distinction offered by Mises between supply and demand-side calculation. Recent cybersocialist proposals should be viewed as opening up several different avenues of research relating to different aspects of the long-running socialist calculation debate, including the inter-relationships between economic calculation, incentives and innovation.

From “Socialist Accounting” to the “Livelihood of Man”: The Viennese and the Columbia Polanyi

Abstract Recent commentary on Karl Polanyi’s oeuvre has argued that the émigré scholar abandoned his earlier concerns of working out a (socialist) alternative to liberal market society when delving into the institutional study of ancient economies at Columbia University from the late 1940s to the late 1950s. This article reconsiders Polanyi’s late work through the lens of his 1920s efforts to theorize socialist accounting and a socialist economy in the context of the early Viennese socialist calculation debate. While many interpretations have been provided of Polanyi’s early and late work, the gradual—for some even “great”—transformation that led to his focus on ancient economic history has neither been reconstructed in detail nor fully understood. Focusing on how Polanyi’s socialist agenda of the earlier years laid the grounds for his institutional approach to economic history, this article draws attention to certain authors who have only rarely been taken into account, in particular, to Otto Neurath and Eugen von Böhm-Bawerk. Polanyi’s late work sits ambiguously between Austrian School economic theory on the one hand and economic history in a “substantive” key, first outlined by Neurath, on the other hand. This Viennese heritage bequeathed both an implicit naturalism and an implicit socialism in Polanyi’s late studies.

Envisioning post-capitalist utopias via simulation: Theory, critique and models

We discuss the role of heterodox economics in opening new perspectives, the question of scalability of socio-economic order, the heritage of the “socialist calculation debate” and its ongoing relevance for discussions on “post-capitalism” today and finally the potentials of computational simulation and agent-based modelling for the exploration of alternative socio-economic approaches. The contributions to our special issue address these aspects and topics in different ways and therefore underline the fruitfulness of these discussions, especially in regard to the development of more just and sustainable socio-economic structures. Faced with the contemporary polycrisis, we can no longer afford “capitalist realism”.

Blockchain and the information – calculation problem

Ludwig von Mises produced an impossibility theorem indicating that economic calculation in the absence of market prices was impossible. This gave rise to the ‘socialist calculation debate’ in the first half of the twentieth century. This paper makes use of the insights of that debate to shed light on other situations where decision makers are required to allocate resources in areas where there are no market prices. A pertinent example would be most corporate social responsibility programs. In the absence of market prices local information cannot be communicated to decision makers. The paper further argues that blockchain technology can create the institutional environment for markets to emerge and consequently overcome the problem of missing prices.

In complexity we trust: learning from the socialist calculation debate for ecosystem management

Abstract

Karl Polanyi’s theory of fictitious commodification as a cultural political economy of institutionalization

ABSTRACT This paper aims to offer a new reading of Karl Polanyi’s political economy by reinterpreting and reconstructing his institutional analysis as a cultural political economy that critiques capitalism as a historically specific symbolic system. For this purpose, it will draw on his earlier concepts from the socialist calculation debate to reinterpret Polanyi’s theory of fictitious commodification. In particular, it will examine how Polanyi conceptualized the symbolic structure of capitalism as an institutional articulation of particular economic facts, accounting concepts, and economic theory. Polanyi not only critiques the intrinsically cultural nature of foundational categories of the capitalist market economy such as profits, factors of production, and fictitious commodities but also shows how the gap between these categories and ‘the reality of society’ eventually brings about crises and crisis tendencies expressed in the ‘double movement’ and the ‘self-protection of society’. In this sense, Polanyi is a critical cultural political economist with contemporary relevance for the analysis of capitalism as a historically specific symbolic system in which culture plays both constitutive and ideological roles.

State capacity and the socialist calculation debate

AbstractDespite its invaluable contribution to the field of comparative economics, the socialist calculation debate has focused on the narrow topic of the impossibility of the rational economic calculation under socialism. The literature on new institutional economics suggests that economic development is determined by economic and political institutions which are far more complex than the issue of economic calculation. To bridge the gap between the calculation debate and new institutional economics, this paper utilizes the historical case studies of Perestroika and Deng's China to demonstrate relationship between state capacity and economic calculation. We argue that rational economic calculation requires the state's institutional ability to make a credible commitment to constraints inhibiting public predation.

On the feasibility of technosocialism

Technological advances associated with computing power and the prospect of artificial intelligence have renewed interest on the economic feasibility of socialism. The question of such feasibility turns on whether the problem of economic calculation has fundamentally changed. In spite of the prospect of what King and Petty (2021) refer to as “technosocialism,” we argue that technological advances in computation cannot replace the competitive discovery process that takes place within the context of the market. We do so by situating the case for technosocialism in the context of the socialist calculation debate. Understood in these terms, technosocialism represents a restatement of the case for market socialism, which incorrectly framed the “solution” to economic calculation under socialism as one of computing data, rather than the discovery of context-specific knowledge that only emerges through the exchange of property rights. Therefore, the arguments put forth by Ludwig von Mises and F.A. Hayek, and later Israel Kirzner and Don Lavoie, regarding the impossibility of economic calculation under socialism remains just as relevant today.

Karl Polanyi’s ‘socialist accounting’ and ‘overview’ in the age of data analytics

ABSTRACT Digital capitalism’s information infrastructure is the subject of contentious debates concerning its transformative effects on the political economy and society. A frequent proposition, referring to older arguments of the ‘socialist calculation debate’, is that with big data analytics the pro-market arguments of neoliberal economists such as Hayek or Mises become obsolete. This article critically examines this proposition by drawing on Karl Polanyi’s notion of overview; a core theme in his outlines of a socialist economy and accounting written in the 1920s. In these contributions to the early Austrian socialist calculation debate, Polanyi discusses how to gain knowledge of the economic and social processes in such a way that the economy can be democratically governed according to its socialist aims and purposes. This article highlights the relevance of Polanyi’s work on socialist accounting, along with his later perspectives on technology and on social scientific method, for reflecting upon data- and algorithm-driven economic governance. Polanyi’s critical analysis of abstraction effected through methods of knowing suggests a sceptical stance vis-à-vis current versions of technological ‘solutionism’, which places its faith in data and algorithms as tools for economic and social, or socialist, planning.

Politicised revisionism: comment on Lopes (2021)

Abstract We comment on a recent article by Lopes (2021), whose argument regarding the writing of the history of the socialist calculation debate is unfortunately burdened by a misconception of both the substance and nature of the argument that ignited the debate. Bringing additional sources from this time to scholars’ attention, we show that there is much more to the Austrian interpretation than standard interpretations of the debate admit. In fact, our findings indicate that Lange’s famous response to Mises’s challenge constitutes a rebuttal of a straw man.

The Politics of Rationality in Early Neoliberalism: Max Weber, Ludwig von Mises, and the Socialist Calculation Debate.

Initiated by Mises and popularized by Hayek, the socialist calculation debate staked a political position on a methodological axiom: the "irrationality" of state planning. This article argues that Weber's typology of "formal" vs. "substantive" rationality at once drew from Austrian School marginalism and helped frame Mises and Hayek's critiques in the calculation debate. In turn, this debate shaped an anti-socialist front among the early neoliberals before their vaunted gatherings in Paris and Mont Pèlerin. Through social scientific interventions, early neoliberalism split economics (qua market rationality) from politics (qua social justice) so as to place the latter beyond the epistemological pale.

Neoliberal Economic Thinking and the Quest for Rational Socialism in China: Ludwig von Mises and the Market Reform Debate.

This paper investigates the long first decade of reform in China (1978-1992) to show that Mises became relevant to the reconfiguration of China's political economy in this period. Mises's critique of socialism came to be debated throughout the 1980s and Chinese economists developed their own reading of Mises and the socialist calculation debate. When Deng Xiaoping reinstated market reforms in the early 1990s, a history of thought review of the possibility of rational socialism and socialist markets helped to justify the Socialist Market Economy with Chinese Characteristics as the official designation of China's economic system to this day.

Neoclassical versus complexity economics: the socialist calculation debate as a clash of paradigms

Neoclassical versus complexity economics: the socialist calculation debate as a clash of paradigms

Introduction: a special issue in honoring Janos Kornai

Janos Kornai is one of the leading economists of the twentieth century. Unfortunately, his interdisciplinary, systemic approach and the Austro-Hungarian convergence on the socialist calculation debate are not explored sufficiently by public choice scholars or by political scientists and economists more generally. The essays published herein try to fill the gaps. In doing so, we start by asking: what is the specific contribution of the eminent economist Janos Kornai to our discipline? The contributions demonstrate that no unique answer to that question is possible. However, despite the diversity of responses, they all converge on one point: Kornai contributes to our understanding of the consequences of an allegedly ‘omnipresent’ state.

Viennese Late Enlightenment and the Early Socialist Calculation Debates: Rationalities and Their Limits

Austrian economist Ludwig Mises’s central role in the socialist calculation debates has been consensually acknowledged since the early 1920s. Yet, only recently, Nemeth, O’Neill, Uebel, and others have drawn particular attention to Mises’s pertinent encounter with one of the most colorful characters of “Red Vienna”: logical empiricist and “skeptic utopist” Otto Neurath. Despite several surprising agreements, Neurath and Mises certainly provide different answers to the questions “what is meant by rational economic theory” (Neurath) and whether “socialism is the abolition of rational economy” (Mises). However, previous accounts and evaluations of the exchange between Neurath and Mises suffer from attaching little regard to highlighting their idiosyncratic uses of the term “rational”. The paper at hand reconstructs and critically compares the different conceptions of rationality defended by Neurath and Mises and suggests some consequent insights with respect to Viennese Late Enlightenment, contemporary rationality wars, the socialist calculation debates, and the foundations of welfare economics.

Almensvellets affortryllelse - Neoliberale anfægtelser af det fælles bedste

This article revisits the origins of neoliberalism, arguing that it arose in the socialist calculation debates in the 1920s and 1930s. In these debates, Ludwig von Mises and Friedrich von Hayek contested socialist conceptions of the public interest, claiming that the market’s price mechanism was far better able to represent the many diffe-rent preferences that a modern mass society consists of. The market, they stressed, was far more efficient at coordinating the economy than state planners who would never be able to calculate or aggregate the necessary data on people’s preferences, which was required to direct markets. This contestation of the common good, the article argues, has been a mainstay throughout neoliberalism’s intellectual history, serving as the revolving point of post-war analyses of government failure.

James M. Buchanan's Constrained Vision in Cost and Choice

James M. Buchanan’s 1969 book Cost and Choice speaks directly to the socialist calculation debate from the perspective of the “London Tradition” in the theory of cost. More than this, however, it places Buchanan alongside Adam Smith, Friedrich Hayek, and Milton Friedman as an exemplar of what Thomas Sowell called “the constrained vision” in his 1987 [2007] book A Conflict of Visions. This essay explores Buchanan’s radical subjectivism in Cost and Choice, why it aligns him with Sowell’s “constrained vision,” and what this implies about Buchanan’s place within political theory generally. His radically subjectivist analysis of cost underlies his constitutional liberalism, and it obviates a more activist, interventionist political agenda.

The Significance of the Knowledge Problem in the Development of Modern Austrian Economics

Kirzner (2018) has argued that one of the essentially epistemic properties of the market economy that cannot be ignored is the Hayekian division of knowledge. Despite the fact that knowledge being dispersed, tacit, existing in fractions and thus unable to be possessed by a single mind seems to be an obvious empirical observation, its significance was not fully appreciated by the profession until the publication of Hayek's (1945) The Use of Knowledge in Society. Though the initial intention of Hayek when writing the paper was to contribute to the socialist calculation debate, Hayek (1945) represents a broader point of view regarding the dynamic nature of the market. Furthermore, by calling attention to the knowledge problem, the paper of Hayek set forth a whole new path for the development of modern Austrian economics that has been continued to the present. This paper aims at summarizing such a significance and powerful influence.

Socialist alternatives to capitalism I: Marx to Hayek

This paper surveys the development of the concept of socialism from the French Revolution to the socialist calculation debate. Karl Marx’s politics of revolutionary socialism led by an empowered proletariat nurtured by capital accumulation envisions socialism as a “top-down” system resting on political institutions, despite Marx’s keen appreciation of the long-period analysis of the organization of social production in the classical political economists. Collectivist thinking in the work of Enrico Barone and Wilfredo Pareto paved the way for the discussion of socialism purely in terms of the allocation of resources. The Soviet experiment abandoned the mixed economy model of the New Economic Policy for a political-bureaucratic administration of production only loosely connected to theoretical concepts of socialism. The socialist calculation debate reductively recast the problem of socialism as a problem of allocation of resources, leading to general equilibrium theory. Friedrich Hayek responded to the socialist calculation debate by shifting the ground of discussion from class relations to information revelation.