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Thread: Economic calculation under socialism

  1. #1
    Dragon
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    Exclamation Economic calculation under socialism

    Economic calculation under socialism: "a leap in the dark"

    Since under socialism there is no private ownership, those actions are rendered impossible. In the most consistent versions of socialism (such as the War Communism implemented right after the Russian Revolution), money is abolished and goods and services are distributed by governmental decree. This is a bona fide recipe for total irrationality.

    More "moderate" versions of socialism do not eliminate money. They allow individuals to have some income which they can spend as they see fit. This enables the establishment of prices for consumer goods and services, which give socialist planners (who play the role of "producers" under socialism) some signals as to the goods and services that need to be produced.

    However, this signal is distorted, as consumers do not earn their income in a free market. Instead, their income is determined by socialist planners, who arbitrarily set the prices of resources (rents, wages, interest rates). Resource prices set in this manner are totally disconnected from the facts of reality, as there are no price signals conveying to planners information about those facts."

    Since, by definition, productive resources are not privately owned under socialism, there can be no market where the prices of those resources are formed by the interaction by demand and supply.

    Even if socialist planners have some knowledge of the goods and services that need to be produced, the obstacles they face in selecting the proper methods of production are impossible to overcome. In the absence of private ownership of the factors of production, there be no market where the prices of those resources are established.

    In producing any good or service, socialist planners are confronted with a vast array of resource combinations. Some processes are more land-intensive, others more labor-intensive, still others more capital-intensive. Furthermore, there is an enormous variety of different types of land, labor, and capital. Similarly, there is a multitude of technologies to choose from.

    Without the guidance of price signals, there is only one way of selecting among those alternatives: The planners' whim. This exposes the utter irrationality of socialism, eloquently expressed in Mises' statement that "Everything would be a leap in the dark."

  2. #2
    xtremeintl.com Mystic Xtremist's Avatar Mystic Xtremist is offline
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    * It's funny for s/he to speak of consumers not earning a proper income in a socialist market. In capitalism, the producers of the goods (the workers) do not earn money based on the value of the goods they produce. That price is set arbitrarily by the capitalist, by the owner of the enterprise. There is no logic -- only theft and anarchy -- in, for example, workers in Asia making pennies a day producing tens and hundreds of shoes that will EACH sell for $120 elsewhere.

    There is no market setting the income of workers in capitalism, only brute force and power. When the workers attempt to rise up and demand more equitable pay, they are beat back by the guns and military presence of the owners, or driven to submit by the simpler fear of losing their job and being in an even worse position. This is not a flickin market, this is oppression.


    * For the author to say that shifting ownership away from private invariably individuals eliminates market and all its forces is disingenuous, and lacking in historical basis. Ownership by the people -- not by an authoritarian government, but by people -- is a viable and more equitable alternative.

    Governmental ownership is almost the same as private ownership; putting resources in the hands of a few to do however they see fit and live off the profits/benefits. To say that's the only alternative is as if to say that, in politics, without a single autonomous ruler or ruling class (monarchy) there will be anarchy. If that is the case, there would be no democracy, no rule by the people.

    But there is democracy; and there is also democratic socialism. There is a market, between nations, between industries, same as there has been. Interesting that for thousands and thousands of years humans provided with a market of communalism (not communism, communalism), but now in barely over a hundred years of the industrial age this has now been rendered impossible.

  3. #3
    xtremeintl.com Mystic Xtremist's Avatar Mystic Xtremist is offline
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    What I find interesting is that, in sports, people can readily see the injustice of capitalism at work. There is a public outcry that the Yankees are reaching monopoly-power status, and need to be reigned in by a hard salary-cap. That there should be revenue-sharing amongst the lesser-able, the smaller-market, etc. teams.

    However, in baseball, the competition is between the rich and the richer, for a championship. The minimum wage is a quite comfy $300K/year. The prize is a ring for a team at the end of the year and bragging rights.

    In capitalism, in real life, the competition is between the overly-rich and the completely destitute, for life. The minimum wage is unlivable, dollars per hour here, pennies per day elsewhere. The prize is a meal for a family at the end of the day and rights to life.

    Everyone thinks baseball is unfair, but this world is doing just fine. Interesting set of priorities we have.

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