Economic calculation in socialism

The debate about the economic calculation in socialism (English Socialist Calculation Debate ) was an economic debate that was first initiated in 1920 and 1922 by Ludwig von Mises . Mises tried to provide the theoretical proof that a socialist economic system could not function because of the lack of the market mechanism and the consequent lack of information about costs and prices. The socialist-oriented economists Oskar Lange and Abba Lerner countered Mises by developing a model that aimed to simulate the market mechanism by a central planning authority.

Mises' position was further represented in a modified form by Friedrich August von Hayek , Trygve JB Hoff , Wilhelm Röpke and Lionel Robbins , while Abram Bergson took an intermediary position. Max Weber took a similar view as Mises in 1922 published posthumously III. Department of the Outline of Social Economics .

Mises' argument was widely accepted within the Austrian School , but was largely rejected by other contemporary economists from the 1920s to 1950s. Since the collapse of communism in Eastern Europe, the debate at that time has been reassessed.

Basic idea

Mises argued that an economy that is controlled by central planning decisions, thus eliminating the market and free pricing, is incapable of realistic accounting - that is, of a rational use of its resources. Costs no longer have any meaning in it, and the value of the factors of production cannot therefore be determined; Without a monetary bill, according to Mises, there is “no means of recognizing what is rational”. After the abolition of private property - or, with Mises, of “private property” - the “anarchic mode of production” (...) is replaced by the useless behavior of an improper apparatus (...). The wheels will turn, but they will run idle. ”From this Mises derived the objective“ impossibility ”of a socialist economy:

“We were able to show where the impracticability of a socialist economic order is to be found. There can be no socialism, not because people are morally too low, but because the tasks that a socialist social order would have to set their reason cannot be solved by human understanding. The unrealisability of socialism is based not in the moral but in the intellectual sphere. Because a socialist society could not count, there can be no common economy. "

The assumption that socialism was “impossible” was not withdrawn by Mises in later years, but it was defused by Hayek and Robbins, among others, and made more compatible, as the real socialist planning that was taking place was compared with reference to the basic ideas of Mises with the market price mechanism - “incredibly clumsy, primitive and inadequate”. Hayek and Robbins saw the problem as a question of more or less economic efficiency, but not - as Mises originally did - as proof of the impossibility of socialism per se. For Hayek, the debate about economic accounting under socialism was the starting point for his later reflections on the function of knowledge in society.

Mises himself, however, stuck to his original view, which he elaborated on in his main theoretical work Human Action (1949). With regard to the Lange and Lerner model (see below), he wrote that both authors would consider the (market) economy from the static perspective of an employed manager who had to perform relatively simple optimization tasks. However, this cannot be compared with the dynamic, risky and speculative decisions made by entrepreneurs, since only entrepreneurs in the narrower sense would make future-oriented decisions:

“In which sectors should production be increased or decreased, in which sectors should the goal of production be changed, which sectors should be newly established? In view of these questions, there is no need to seek the honest manager and his proven efficiency. Those who confuse management with entrepreneurship close their eyes to the economic problem [...] The capitalist system is not a management system, but an entrepreneurial system. "

Opposite position of Lange and Lerner

The Marxist economists Oskar Lange and Abba Lerner developed the Lange-Lerner theorem (later expanded to the Lange-Taylor-Dickenson model ) in response to Mises' arguments . On the basis of the neoclassical theory, the two economists proposed a trial-and-error process for an economy with state ownership of the means of production and central economic planning. Under such conditions, concluded Lange and Lerner, the price mechanism would also work under socialism and a Pareto-efficient state could also be achieved in a socialist economy. Strict rules governing the behavior of managers and pricing can virtually simulate the market. Based on the neoclassical assumptions, Lange and Lerner were even of the opinion that socialism would work better than capitalism, since only in socialism could complete competition prevail, while capitalism was characterized by monopolies. In his 1936 work On the Economic Theory of Socialism , Lange pointed out - with clearly ironic undertones - the importance of Mises' considerations:

“Socialists have good reasons to be grateful to Professor Mises as a great advocate diaboli of their cause. Because it was his powerful criticism that first moved the socialists to recognize how important an adequate system of economic accounting is [...] In a socialist state, out of gratitude for its great services and as a reminder of the importance of economic accounting Statues by Professor Mises will be placed in the Ministry of Nationalization and in the Central Planning Authority. "

In a late work Computer and Market from 1965, Lange returned once more to the question of economic accounting under socialism. Now he was of the opinion that the market mechanism was overtaken by technological innovations: powerful mainframes could solve any economic equation in seconds and no longer needed the market; this was nothing more than a "calculating machine of the pre-electronic times".

Contemporary reception

For contemporary authors, the debate about economic accounting under socialism was decided in favor of Lange and Lerner; Mises's thoughts were considered inaccurate or, at best, of theoretical interest. For example, B. Frank H. Knight of the Chicago School , the debate about economic accounting in socialism is nothing but "smoke and mirrors", the individual economic participants would not act differently in socialism than in capitalism. Socialism is a political question, to the treatment of which economic theory can hardly contribute.

Even Joseph Schumpeter , himself coming from the tradition of the Austrian School, saw the views of Mises and Hayek as definitely wrong and declared in his main work Capitalism, Socialism and Democracy (1942): “Can socialism work? Of course he can. There can be no doubt about this if we assume, firstly, that the required level of industrial development has been reached and, secondly, that transition problems can be successfully resolved. "

Today's rating

The collapse of the socialist economic and social systems in Eastern Europe led to a revaluation of the debate about economic accounting under socialism. For example, the post-Keynesian Polish economist Kazimierz Laski came to the conclusion in 1989 that Oskar Lange and his colleagues "ultimately never managed to meet the Austrian criticism"

The economist Geoffrey Hodgson , who himself belongs to the school of institutional economics , came to the conclusion in 1999 that Mises and Hayek had been right with their criticism on the central points, since in the model of Lange, Taylor and Dickenson it was ultimately not possible to limit costs to calculate correctly and thereby make rational decisions:

“In a dynamic and uncertain world, investments depend on the entrepreneur's expectations and premonitions, not just on the explicit costs. This failure [of socialism, note] is crucial in all questions of learning, innovation and economic growth. However, a stagnant, bureaucratic version of the Lange-Taylor-Dickenson model might be possible in practice if it is accompanied by illegal but real markets and driven by ideological warnings. [...] Although it was bureaucratic and cumbersome, the system [in the Eastern Bloc, note] worked for decades. But Hayek and Mises have shown that such a system, if you describe it according to common criteria, could be neither rational, nor dynamic, nor efficient. "

literature

Primary literature

• Ludwig von Mises : The common economy - studies on socialism . 1996, ISBN 3-87881-103-9 ( docs.mises.de [PDF; 2.9 MB ] Facsimile of the 1922 edition).
• Ludwig von Mises: Human Action: A Treatise on Economics (Scholars Edition) . Ludwig von Mises Institute, Auburn (Alabama) 2007, ISBN 978-0-945466-24-6 , XXVI. The Impossibility of Economic Calculation under Socialism , p. 694–711 ( mises.org [PDF; 55.7 MB ] Reprint of the first edition).
• Friedrich August von Hayek: The Nature and History of the Problem . In: Friedrich August von Hayek (Ed.): Collectivist Economic Planning . 1935, p. 1-47 .

Secondary literature

• David M. Levy, Sandra J. Peart: Socialist calculation debate . In: Steven N. Durlauf and Lawrence E. Blume (Eds.): The New Palgrave Dictionary of Economics . 2nd Edition. Palgrave Macmillan, 2008.
• Peter J. Boettke (Ed.): Socialism and the market: The socialist calculation debate re-visited . 9 volumes. Routledge, London 2000, ISBN 0-415-19586-1 (annotated text collection).

Individual evidence

1. ↑ Ludwig von Mises: The common economy. Studies on Socialism. Jena 1932, p. 99.
2. ^ Mises: Public Economy. P. 420.
3. ↑ Friedrich August von Hayek: The way to servitude. Erlenbach / Zurich 1952, p. 75.
4. ↑ cit. n. Murray M. Rothbard: The End of Socialism and the Calculation Debate revisited. In: Ders: Economic Controversies . Auburn 2011, ISBN 978-1-933550-96-1 , pp. 827-858, here p. 836.
5. ↑ cit. n. Rothbard, p. 856.
6. ^ Oskar Lange: Computer and Market. In: Halina Jaroslawska (ed.): Economic-theoretical studies . Frankfurt am Main / Cologne, 1977, ISBN 3-434-30175-5 , pp. 323-327.
7. ↑ On Knight's (negative) review of the English edition of Mises' Gemeinwirtschaft cf. Journal of Political Economy. Volume 46, 1938, p. 267 ff.
8. ↑ cit. n. Hans Putnoki, Paul Hilgers: Great economists and their theories. A chronological overview. Weinheim 2013, ISBN 978-3-527-50730-6 , p. 91 f.
9. ↑ Włodzimierz Brus, Kazimierz Laski: From Marx to the market: Socialism in search of an economic system. Oxford 1989, ISBN 0-19-828399-7 , p. 60.
10. ^ Geoffrey M. Hodgson: Economics and Utopia: Why the Learning Economy is Not the End of History. New York / London 1999, ISBN 0-415-07506-8 , p. 40.