This is so anachronistic and stupid I see why these people never get ahead:
In 1920, the right-wing economist Ludwig von Mises declared socialism to be impossible. A leading member of the "Austrian" school of economics, he argued this on the grounds that without private ownership of the means of production, there cannot be a competitive market for production goods and without a market for production goods, it is impossible to determine their values. Without knowing their values, economic rationality is impossible and so a socialist economy would simply be chaos -- While applying his "calculation argument" to Marxist ideas of a future socialist society, his argument, it is claimed, is applicable to all schools of socialist thought, including libertarian ones. It is on the basis of his arguments that many right- wingers claim that libertarian (or any other kind of) socialism is impossible in principle. As David Schweickart observes "t has long been recognised that von Mises's argument is logically defective. Even without a market in production goods, their monetary values can be determined." [Against Capitalism, p. 88] In other words, economic calculation based on prices is perfectly possible in a libertarian socialist system. After all, to build a workplace requires so many tonnes of steel, of many bricks, so many hours of work and so on. If we assume a mutualist (i.e. market socialist/co-operative) libertarian socialist society, then the prices of these goods can be easily found as the co- operatives in question would be offer their services on the market. These commodities would be the inputs for the construction of production goods and so the latter's monetary values can be found (this does not address whether monetary values accurately reflect real costs. Ironically enough, von Mises did mention the idea of such a mutualist system in his initial essay. He wrote of a system in which "the 'coal [miners'] syndicate' provides the 'iron [workers'] syndicate'" with goods and argued that "no price can be formed, except when both syndicates are the owners of the means of production employed in their business" (which may come as a surprise to transnational companies whose different workplaces sell each other their products!) Such a system is dismissed: "This would not be socialisation but workers' capitalism and syndicalism." [Op. Cit., p. 112] However, his logic is flawed. Firstly, as we noted, modern capitalism shows that workplaces owned by the same body (in this case, a large company) can exchange goods via the price form. That von Mises makes such a statement indicates well the firm basis of his argument in reality. Secondly, such a system may be, as von Mises states, "syndicalism" (at least a form of syndicalism, as most syndicalists were and still are in favour of libertarian communism, a simple fact apparently unknown to von Mises) but it is not capitalist as there is no wage labour involved as workers' own and control their own means of production. Indeed, von Mises ignorance of syndicalist thought is striking. In Human Action he asserts that the "market is a consumers' democracy. The syndicalists want to transform it into a producers' democracy." [p. 809] Most syndicalists, however, aim to abolish the market and all aim for workers' control of production to complement (not replace) consumer choice. Syndicalists, like other anarchists, do not aim for workers' control of consumption as von Mises asserts. Given that von Mises asserts that the market, in which one person can have a thousand votes and another one, is a "democracy" his ignorance of syndicalist ideas is perhaps only one aspect of a general ignorance of reality. Indeed, such an economy also strikes at the heart of von Mises' claims that socialism was "impossible." Given that von Mises accepted that there may be markets, and hence market prices, for consumer goods in a socialist economy his claims of the impossibility of socialism seems unfounded. For von Mises, the problem for socialism is that "because no production-good will ever become the object of exchange, it will be impossible to determine its monetary value." [Op. Cit., p. 92] The flaw in his argument is clear. Taking, for example, coal, we find that it is both a means of production and of consumption. If a market in consumer goods is possible for a socialist system, then competitive prices for production goods is also possible as syndicates producing production-goods would also sell the product of their labour to other syndicates or communes. Thus, when deciding upon a new workplace, railway or house, the designers in question do have access to competitive prices with which to make their decisions. Nor does his argument work against communal ownership in such a system as the commune would be buying products from syndicates in the same way as one part of a multi-national company can buy products from another part of the same company under capitalism. That goods produced by self- managed syndicates have prices does not imply capitalism, regardless of von Mises' claims. Thus economic calculation based on competitive market prices is possible under a socialist system. Indeed, we see examples of this even under capitalism. For example, the Mondragon co- operative complex in the Basque Country indicate that a libertarian socialist economy can exist and flourish. There is no need for capital markets in a system based on mutual banks and networks of co- operatives (indeed, as we argue capital markets hinder economic efficiency by generating a perverse set of incentives and misleading information flows and so their abolition would actually aid production and productive efficiency).
As David Schweickart observes "t has long been recognised that von Mises's argument is logically defective. Even without a market in production goods, their monetary values can be determined." [Against Capitalism, p. 88] In other words, economic calculation based on prices is perfectly possible in a libertarian socialist system. After all, to build a workplace requires so many tonnes of steel, of many bricks, so many hours of work and so on. If we assume a mutualist (i.e. market socialist/co-operative) libertarian socialist society, then the prices of these goods can be easily found as the co- operatives in question would be offer their services on the market. These commodities would be the inputs for the construction of production goods and so the latter's monetary values can be found (this does not address whether monetary values accurately reflect real costs.
Ironically enough, von Mises did mention the idea of such a mutualist system in his initial essay. He wrote of a system in which "the 'coal [miners'] syndicate' provides the 'iron [workers'] syndicate'" with goods and argued that "no price can be formed, except when both syndicates are the owners of the means of production employed in their business" (which may come as a surprise to transnational companies whose different workplaces sell each other their products!) Such a system is dismissed: "This would not be socialisation but workers' capitalism and syndicalism." [Op. Cit., p. 112] However, his logic is flawed. Firstly, as we noted, modern capitalism shows that workplaces owned by the same body (in this case, a large company) can exchange goods via the price form. That von Mises makes such a statement indicates well the firm basis of his argument in reality. Secondly, such a system may be, as von Mises states, "syndicalism" (at least a form of syndicalism, as most syndicalists were and still are in favour of libertarian communism, a simple fact apparently unknown to von Mises) but it is not capitalist as there is no wage labour involved as workers' own and control their own means of production.
Indeed, von Mises ignorance of syndicalist thought is striking. In Human Action he asserts that the "market is a consumers' democracy. The syndicalists want to transform it into a producers' democracy." [p. 809] Most syndicalists, however, aim to abolish the market and all aim for workers' control of production to complement (not replace) consumer choice. Syndicalists, like other anarchists, do not aim for workers' control of consumption as von Mises asserts. Given that von Mises asserts that the market, in which one person can have a thousand votes and another one, is a "democracy" his ignorance of syndicalist ideas is perhaps only one aspect of a general ignorance of reality. Indeed, such an economy also strikes at the heart of von Mises' claims that socialism was "impossible." Given that von Mises accepted that there may be markets, and hence market prices, for consumer goods in a socialist economy his claims of the impossibility of socialism seems unfounded. For von Mises, the problem for socialism is that "because no production-good will ever become the object of exchange, it will be impossible to determine its monetary value." [Op. Cit., p. 92] The flaw in his argument is clear. Taking, for example, coal, we find that it is both a means of production and of consumption.
If a market in consumer goods is possible for a socialist system, then competitive prices for production goods is also possible as syndicates producing production-goods would also sell the product of their labour to other syndicates or communes. Thus, when deciding upon a new workplace, railway or house, the designers in question do have access to competitive prices with which to make their decisions. Nor does his argument work against communal ownership in such a system as the commune would be buying products from syndicates in the same way as one part of a multi-national company can buy products from another part of the same company under capitalism. That goods produced by self- managed syndicates have prices does not imply capitalism, regardless of von Mises' claims. Thus economic calculation based on competitive market prices is possible under a socialist system. Indeed, we see examples of this even under capitalism. For example, the Mondragon co- operative complex in the Basque Country indicate that a libertarian socialist economy can exist and flourish. There is no need for capital markets in a system based on mutual banks and networks of co- operatives (indeed, as we argue capital markets hinder economic efficiency by generating a perverse set of incentives and misleading information flows and so their abolition would actually aid production and productive efficiency).
So many errors. It seems like they ignored the calculation debate completely. The first major problem is that just taking the consumer price for coal reveals nothing regarding its utility as a capital good. They gloss over and ignore Mises' argument against these socialist communes being able to even price capital goods in the first place, ignoring the heterogeneity/complementarity of capital. They do not realize that the "islands of socialism in a sea of capitalism" destroys the argument that because firms can price goods within themselves that this means an entire economy can be run independently of the market. It's as though the calculation debate never took place. See this article by Rothbard, and you'll notice the horrific ignorance of anything that has happened since Lange's defeat. They even fail to realize that Mises' definition of capitalism is free exchange of private property, and so they rule out a priori that syndicalism is "worker's capitalism".
-Jon.
I cannot be caged. I cannot be controlled. Understand this as you die, ever pathetic, ever fools.
Irenicus' Diaries.
More:
In response to von Mises initial challenge, a number of economists pointed out that Pareto's disciple, Enrico Barone, had already, 13 years earlier, demonstrated the theoretical possibility of a "market-simulated socialism." However, the principal attack on von Mises's argument came from Fred Taylor and Oscar Lange (for a collection of their main papers, see On the Economic Theory of Socialism, Benjamin Lippincott (ed.), University of Minnesota, 1938). In light of their work, Frederick von Hayek shifted the question from theoretical impossibility to whether the theoretical solution could be approximated in practice. Thus even von Hayek, a major free-market capitalist guru, seemed to think that von Mises's argument could not be defended. Moreover, it should be noted that both sides of the argument accepted the idea of central planning of some kind or another. This means that many of von Mises's and von Hayek's arguments did not apply to libertarian socialism, which rejects central planning along with every other form of centralisation. This is a key point, as most members of the right seem to assume that "socialists" all agree with each other in supporting a centralised economic system. In other words, they ignore a large segment of socialist thought and history in order to concentrate on Social Democracy and Leninism. The idea of a network of "people's banks" and co-operatives working together to meet their common interests is ignored, although it has been a common feature in socialist thought since the time of Robert Owen. Nor was Taylor and Lange's response particularly convincing in the first place. This was because it was based far more on neo-classical capitalist economic theory than on an appreciation of reality. In place of the Walsrian "Auctioneer" (the "god in the machine" of general equilibrium theory which ensures that all markets clear) Taylor and Lange presented the Planning Authority (the "Central Planning Board"), whose job it was to adjust prices so that all markets cleared. Neo-classical economists who are inclined to accept Walrasian theory as an adequate account of a working capitalist economy will be forced to accept the validity of Taylor and Lange's version of "socialism." Little wonder Taylor and Lange were considered, at the time, the victors in the "socialist calculation" debate by most of the economics profession (with the collapse of the Soviet Union, this decision has been revised somewhat -- although we must point out that Taylor and Lange's model was not the same as the Soviet system, a fact conveniently ignored by commentators). Unfortunately, given that Walrasian theory has little bearing to reality, we must also come to the conclusion that the Taylor-Lange "solution" has about the same relevance (even ignoring its non-libertarian aspects, such as its basis in state-ownership, its centralisation, its lack of workers' self-management and so on). Many people consider Taylor and Lange as fore-runners of "market socialism." This is incorrect -- rather than being market socialists, they are in fact "neo-classical" socialists, building a "socialist" system which mimics capitalist economic theory rather than its reality. Replacing Walrus's mythical creation of the "Auctioneer" with a planning board does not really get to the heart of the problem! Nor does their vision of "socialism" have much appeal -- a re-production of capitalism with a planning board and a more equal distribution of money income. Anarchists reject such "socialism" as little more than a nicer version of capitalism, if that. With the collapse of the Soviet Union, it has been fashionable to argue that "von Mises was right" and that socialism is impossible (of course, during the cold war such claims were ignored as the Soviet threat had to boosted and used as a means of social control and to justify state aid to capitalist industry). Nothing could be further from the truth. As we have argued in the previous section and elsewhere, these countries were not socialist at all and did not even approximate the (libertarian) socialist idea (which is the -only- true form of socialism). Obviously the Soviet Union and Eastern European countries had authoritarian "command economies" with central bureaucratic planning, and so their failure cannot be taken as proof that a decentralised, libertarian socialism cannot work. Nor can von Mises' and von Hayek's arguments against Taylor and Lange be used against a libertarian mutualist or collectivist system as such a system is decentralised and dynamic (unlike the "neo-classical" socialist model they proposed). Libertarian socialism of this kind did, in fact, work remarkably well during the Spanish Revolution in the face of amazing difficulties, with increased productivity and output in many workplaces as well as increased equality and liberty (see Sam Dolgoff, The Anarchist Collectives or Gaston Leval's Collectives in the Spanish Revolution Thus von Mises "calculation argument" does not prove that socialism is impossible. The theoretical work of such socialists as David Schweickart (see his Against Capitalism for an extensive discussion of a dynamic, decentralised market socialist system) and others on market socialism shows that von Mises was wrong in asserting that "a socialist system with a market and market prices is as self-contradictory as is the notion of a triangular square." Indeed, by suppressing capital markets in favour of simple commodity production, a mutualist system will improve upon capitalism by removing an important source of perverse incentives which hinder long term investment and social responsibility (see section I.4.8) in addition to reducing inequalities, increasing freedom and improving general economic performance.
Review: Ahh socialists, you gotta hate them; "Dynamic, decentralized market socialist system" - So much fancy rethoric and so little substance...
"Try to imagine a regulation of labor imposed by force that is not a violation of liberty; a transfer of wealth imposed by force that is not a violation of property. If you cannot reconcile these contradictions, then you must conclude that the law cannot organize labor and industry without organizing injustice." — from The Law
What's more, I don't see any understanding of the problems faced by socialism in their responses. Just evasion.
-Jon
From where did you find this "response"?
How much slaughter, mayhem, destruction and death have to happen before we end socialism? We have the horrible socialist experiments of Communism and Facism all based upon these wonderful utopian ideas and ending in mass death on a scale greater than any in human history.
But we have our democratic socialists of Western Europe who are supposedly doing wonderful at least in theory. They are just like the slight less democratic socialism of the US in a slow movement to poverty funded by energy suppliers and billions of ex-communists.
We also have modern Cuba if you call it that. We see the second Castro on the precipice of making some serious market reforms to avoid the usual components of socialism mass starvation and chaos. And better yet we have Zimbabwae out there, another paradigm of efficiency and the once bread basket of Africa is now the basket case of Africa.
Give it up. We need more freedom not less. We need less regulation. We need efficient markets without the hand of the state. These are the only ways out for the entire race.
Magnus: From where did you find this "response"?
my guess would be the recycling bin
The state is a disease and Liberty is the both the victim and the only means to a lasting cure.
It was transcribed by a socialist on another forum I'm on. I pointed out all the errors in it, only for him to quote more en masse.
billott1:How much slaughter, mayhem, destruction and death have to happen before we end socialism? We have the horrible socialist experiments of Communism and Facism all based upon these wonderful utopian ideas and ending in mass death on a scale greater than any in human history.
Real Socialism has never been tried!!! OR We just need to get the RIGHT people in charge!!!!!11
Equality before the law and material equality are not only different but are in conflict with each other; and we can achieve either one or the other, but not both at the same time. -- F. A. Hayek in The Constitution of Liberty
Just to see if I got this right:The basic magician's trick here is to replace a central planning board with many decentralized planning boards, both of which don't have an incentive to calculate reasonably, but instead of a 'bossy' planning committee you now get a 'democratic' net of planning entities. That, of course, appeals more to the predominant Zeitgeist than traditional central planning approaches, but is actually the same skeleton in new clothes.Did my fledgling Austrian spider-sense detect the fallacy?
Mises' original argument applies strictly to global socialism - its extended forms were developed by Rothbard and Reisman. Either way though, the objections by the authors in my OP are wrongheaded, as I demonstrated. They propose to solve the problem by changing the form of the very cause, but only so much so as to leave it unchanged in the end. And in this utter incomprehension of Mises, they think they have refuted him.