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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

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LUDWIG VON MISES (1881-1973)
Chronological Bibliography

"Economic Calculation in the Socialist Commonwealth."

In a centrally directed socialist economy, economic calculation is impossible. Given a list of consumer goods to produce, how can the planning board decide what to do? Figures by which costs can be evaluated against output are meaningless unless these reflect the subjective values of the economic actors. The planning board, since it does not produce in a market, has nothing that will give it such figures. Engineering efficiency differs entirely from economic efficiency. Mises in this article cites both Enrico Barone and Vilfredo Pareto, disproving the often made allegation that his argument fails because he ignored their earlier solutions to the calculation problem.

Ludwig von Mises:
An Annotated Bibliography
David Gordon

The significance of Mises's 1920 article extends far beyond its devasting demonstration of the impossibility of socialist economy and society. It provides the rationale for the price system, purely free markets, the security of private property against all encroachments, and sound money. Its thesis will continue to be relevant as long as economists and policy makers want to understand why even minor government economic interventions consistently fail to achieve socially beneficial results.

Postscript by Joseph T. Salerno
"Economic Calculation in the Socialist Commonwealth."