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Mises and Thucydides

Tags Calculation and KnowledgePhilosophy and Methodology

01/07/2002Tibor R. Machan

The famous calculation problem facing centrally planned economies, identified by Ludwig von Mises and his followers, and the famous tragedy of the commons hinted at early on by Thucydides and Aristotle and developed more fully by Garret Hardin, are, in effect, two sides of the same coin.

The one side is the description, and the other the evaluation of the same phenomenon, namely, the refusal to recognize private property rights in human affairs.

Put briefly, when individuals are not owners of resources, they are not able to assess their value; and, when resources are publicly owned, their use will be systematically hasty and imprudent. Thucydides put it this way:

[T]hey devote a very small fraction of the time to the consideration of any public object, most of it to the prosecution of their own objects. Meanwhile, each fancies that no harm will come to his neglect, that it is the business of somebody else to look after this or that for him; and so, by the same notion being entertained by all separately, the common cause imperceptibly decays. (Thucydides, The History of the Peloponnesian War, bk. I, sec. 141).

Of course, that individuals are not able to assess the value of things to them may or may not be a good thing. Only if they ought to be able to do so could this be something bad. But when we realize that public ownership leads to systematic haste and imprudence--for example, because resources are quickly depleted if no one knows what are the limits of use to which these resources may be put--we get a hint that the inability of assessing the value of resources has deleterious consequences for most of us, with no one to blame for this except perhaps those who insist on keeping the institution of public ownership in force.

That's the tragedy. No one is in a position to assess just how much of the resources contained in the commons is available to any particular one of us, so as much as can be accessed and used will in fact be consumed. This will involve taking as much and as quickly as will be possible, while others scramble equally hard to do the same. The resulting depletion is not, then, a matter of greed or something else unreasonable, but of doing the most that can be done so as to achieve one's very likely legitimate goals.

As to the source of the calculation problem in collectivist systems, such as socialism, F. A. Hayek has this to say:

It is more than a metaphor to describe the price system of telecommunications which enables individual producers to watch merely the movements of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement. (F.A. Hayek, Individualism & Economic Order, Chicago: Henry Regnery, 1972, pp. 86-87)

The point being, of course, that when one owns a resource, one allocates just the amount of it to this or that purchase, based on what one knows of one's own circumstances, needs, wants, etc., which, in turn, contributes to an overall telecommunications system that serves to inform consumers and producers and thus manages the allocation of resources throughout the marketplace.

It is an underlying assumption of both the tragedy and the calculation problem that individual human beings, not collectives, tribes, or communities, make decisions concerning how resources will be used.

Indeed, in an absolute monarchy, where the king owns everything and no one other than the king has the recognized authority to decide on the disposition and use of anything, there is no tragedy of the commons, nor is there any kind of calculation problem. The country is one huge piece of private property, and whatever the king decides is exactly the efficient thing to do; however resources are allocated is precisely the best way to allocate them.

Those who go without do not matter, since it is the king's decision that they should go without. And the materials that get depleted are exactly what ought to be depleted, given that this king has so decreed.

Of course, since the king isn't really the only person with the rightful authority to make decisions about everything, this system isn't going to succeed very long. The king will be resisted, on and off, and eventually deposed by someone who promises better recognition of the sovereignty of members of the society.

Let's put the tragedy of the commons in concrete terms. Consider that a cattle rancher is interested in supplying his cattle with as much feed as he can. It is not a matter of what one owns or has obtained via rent, but of the effectiveness of the scramble.

All the ranchers are under the impression that the commons is available to them, so they will all try as hard as possible to obtain as much as they can, and this leads to a kind of grabbing from the commons before others take what they want to take. This can occur in the case of ranchers using the common grazing fields or in the case of special-interest groups and their lobbyists taking as much as they are able to via the political process of voting and related means for getting something from the Treasury.

When it comes to commonly owned resources, such as public lakes, rivers, the atmosphere, or forests, this process leads to conduct that is often considered greedy but merely consists of supplying oneself with what one believes one may be able to make good use of for purposes of pursuing one's goals. Painters, scholars, scientists, merchants, and all will follow this policy of taking the resources and running away with them, not because they are evil or wicked but because they are committed to their tasks.

The way this resembles the calculation problem is not all that difficult to understand. Without private ownership of the resources, the value of such resources is indeterminable. Private owners look to other private owners and those who purchase them to establish the prices of resources.

Differential utilization of the resources will prompt different people to ask for and pay different prices, leading to a helpful if not flawless communication system concerning how important the resources are in a given marketplace. But the commons do not permit such determination and, as a result, impede communication between users and suppliers.

One might think, as did socialist planners, that some central authority, standing in for the public (as seen by a dictator or democratic assembly), could tell just how much of the resources should be used by whom and for what purpose. But no general purpose exists to which such a determination can be made to conform (other than in small groups, perhaps, such as a kibbutz or convent or commune wherein a few members come to agree on their common goals).

So the depletion of resources is necessarily unguided by coordination of supply and demand throughout the market via the more or less accurate registration of individual or small group wants and needs.

In this way, then, the tragedy of the commons and the calculation problem amount to two distinct but related sides of the same obstacle to central planning or even just government regulation. What they have firmly in common is that they arise from the vital fact of human individuality, a central feature of human life that only the free marketplace can accommodate optimally.



Tibor R. Machan

Tibor R. Machan (1939 - 2016) was a Hoover research fellow, Professor Emeritus, Department of Philosophy, Auburn University, Alabama, and held the R. C. Hoiles Endowed Chair in Business Ethics and Free Enterprise at the Argyros School of Business & Economics, Chapman University.

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