Human Action

The socialist tracts deal with everything except the essential and unique problem of socialism, viz., economic calculation. It is only in the last years that socialist writers have no longer been able to avoid paying attention to this primordial matter. They have begun to suspect that the Marxian technique of smearing “bourgeois” economics is not a sufficient method for the realization of the socialist utopia. They have tried to substitute a theory of socialism for the scurrilous Hegelian metaphysics of the Marxian doctrine. They have embarked upon designing schemes for socialist economic calculation. Of course, they have lamentably failed in this task. It would hardly be necessary to deal with their spurious suggestions were it not for the fact that such examination offers a good opportunity to bring into relief fundamental features both of the market society and of the imaginary construction of a nonmarket society.

The various schemes proposed can be classified in the following way:

1. Calculation in kind is to be substituted for calculation in terms of money. This method is worthless. One cannot add or subtract numbers of different kinds (heterogeneous quantities).2

2. Starting from the ideas of the labor theory of value, the labor-hour is recommended as the unit of calculation. This suggestion does not take into account the original material factors of production and ignores the different qualities of work accomplished in the various labor-hours worked by the same and by different people.

3. The unit is to be a “quantity” of utility. However, acting man does not measure utility. He arranges it in scales of gradation. Market prices are not expressive of equivalence, but of a divergence in the valuation of the two exchanging parties. It is impermissible to neglect the fundamental theorem of modern economics, namely, that the value attached to one unit of a supply of n-1 units is greater than that attached to one unit of a supply of n units. [p. 704]

4. Calculation is to be made possible by the establishment of an artificial quasi-market. This scheme is dealt with in section 5 of this chapter.

5. Calculation is to be made with the aid of the differential equations of mathematical catallactics. This scheme is dealt with in section 6 of this chapter.

6. Calculation is to be made superfluous by resorting to the method of trial and error. This idea is dealt with in section 4 of this chapter.

• 2 It would hardly be worth while even to mention this suggestion if it were not the solution that emanated from the very busy and obtrusive circle of the “logical positivists” who flagrantly advertise their program of the “unified science.” Cf. the writings of the late chief organizer of this group, Otto Neurath, who in 1919 acted as the head of the socialization bureau of the short-lived Soviet republic of Munich, especially his Durch die Kriegswirtschaft zur Naturalwirtschaft (Munich, 1919), pp. 216 ff. Cf. also C. Landauer, Planwirtschaft und Verkehrswirtschaft (Munich and Leipzig, 1931), p. 122.