Economic Calculation in the Socialist Commonwealth
by Ludwig von Mises (1920)
It must follow from what we have been able to establish in our previous arguments that the protagonists of a socialist system of production claim preference for it on the ground of greater rationality as against an economy so constituted as to depend on private ownership of the means of production. We have no need to consider this opinion within the framework of the present essay, in so far as it falls back on the assertion that rational economic activity necessarily cannot be perfect, because certain forces are operative which hinder its pursuance. In this connection we may only pay attention to the economic and technical reason for this opinion. There hovers before the holders of this tenet a muddled conception of technical rationality, which stands in antithesis to economic rationality, on which also they are not very clear. They are wont to overlook the fact that "all technical rationality of production is identical with a low level of specific expenditure in the processes of production."  They overlook the fact that technical calculation is not enough to realize the "degree of general and teleological expediency"  of an event; that it can only grade individual events according to their significance; but that it can never guide us in those judgments which are demanded by the economic complex as a whole. Only because of the fact that technical considerations can be based on profitability can we overcome the difficulty arising from the complexity of the relations between the mighty system of present-day production on the one hand and demand and the efficiency of enterprises and economic units on the other; and can we gain the complete picture of the situation in its totality, which rational economic activity requires. 
These theories are dominated by a confused conception of the primacy of objective use value. In fact, so far as economic administration is concerned, objective use value can only acquire significance for the economy through the influence it derives from subjective use value on the formation of the exchange relations of economic goods. A second confused idea is inexplicably involved<--the observer's personal judgment of the utility of goods as opposed to the judgments of the people participating in economic transactions. If anyone finds it "irrational" to spend as much as is expended in society on smoking, drinking, and similar enjoyments, then doubtless he is right from the point of view of his own personal scale of values. But in so judging, he is ignoring the fact that economy is a means, and that, without prejudice to the rational considerations influencing its pattern, the scale of ultimate ends is a matter for conation and not for cognition.
The knowledge of the fact that rational economic activity is impossible in a socialist commonwealth cannot, of course, be used as an argument either for or against socialism. Whoever is prepared himself to enter upon socialism on ethical grounds on the supposition that the provision of goods of a lower order for human beings under a system of common ownership of the means of production is diminished, or whoever is guided by ascetic ideals in his desire for socialism, will not allow himself to be influenced in his endeavors by what we have said. Still less will those "culture" socialists be deterred who, like Muckle, expect from socialism primarily "the dissolution of the most frightful of all barbarisms--capitalist rationality."  But he who expects a rational economic system from socialism will be forced to re-examine his views.
. Friedrich von Gottl-Ottlilienfeld, Wirtschaft und technik (Grundriss der Sozial?konomik, Section II; T?bingen: J.C.B. Mohr, 1914), p. 220.
. Friedrich von Gottl-Ottlilienfeld, Wirtschaft und technik (Grundriss der Sozial?konomik, Section II; T?bingen: J.C.B. Mohr, 1914), p. 219.
. Friedrich von Gottl-Ottlilienfeld, Wirtschaft und technik (Grundriss der Sozial?konomik, Section II; T?bingen: J.C.B. Mohr, 1914), p. 225.
. Friedrich Muckle, Das Kulturideal des Sozialismus (Munich and Leipzig: Duncker & Humblot, 1919), p. 213. On the other hand, Muckle demands the "highest degree of rationalisation of economic life in order to curtail hours of labor, and to permit man to withdraw to an island where he can listen to the melody of his being."