It\’s the way Lenin tells \’em

The underlying problem is the impossibility of rational economic calculation in a capitalist system.


It\’s the impossibility of rational economic calculation in any system.

We are thus left looking for the least bad method of economic calculation that we can find. Which turns out not to be either capitalist or socialist: but market.

5 thoughts on “It\’s the way Lenin tells \’em”

  1. Oh Timothy – aren’t you a little old to believe in fairy tales? There’s no such thing as “the impossibility of rational economic calculation”, darling, it’s just something they invented to frighten children, and those with child-like minds.

    Oh, and you sighed as well. I’ve exasperated you with my deviations. I’m so sorry.

  2. lenin,

    so it’s not rational economic calculation that’s a fairy tale, it’s the idea that it’s impossible!

    well, what a turn around.

    I presume the complete absence of any individual or group who can claim to be able to perform such a calculation is no barrier to believing they exist.

  3. One of the things that finally floored communism in Russia was that nobody had the slightest idea what anything was really worth. Only the market can tell you. And the thing about the market is it is down to individual decisions about what individuals need in specific circumstances. Any attempt at setting fixed “values” for stuff is doomed. I mean a 911 turbo is “objectively” a more expensive motor than a transit van. Is it more “valuable”? Sometimes but not when you have to move a wardrobe.

  4. NickM:

    You entirely misunderstand the nature of the argument under discussion; it’s only tangentially related to any difficulty in “setting fixed values.”
    As a matter of fact, that particular difficulty, though it certainly exists in a socialist nation, can be dealt with, to an extent, by mimicking prices
    on outside market economies, a practice in which socialist nations actually did engage.

    But the real killer of any idea of social ownership and management of production (and the “killer” argument enunciated by Mises in 1920) is that, without a MARKET FOR HIGHER-ORDER GOODS (“the tools of production”), I.E., A MARKET FOR SHARES IN THE PRODUCTIVE ENTERPRISES (what we call the “stock market”), it’s impossible for directors to determine if their activities are generating profits or losses, that is to say, whether they’re allocating resources properly or not.

    Mises said then (1920), that one day we’d go to bed with the USSR one of the most powerful nations and wake up to find it no longer existed.

    An ironic fact is the legislature–the Politburo–of Poland recognized the critical importance of the argument almost immediately and came within a single vote of honoring Mises–their greatest
    intellectual opponent–with a statue for having
    clearly enunciated the problem to be solved.

    Unfortunately (for us, that is, non-socialists) the inability of economic calculation of that sort, while a death sentence for the socialist commonwealth, severely affects economic well-being even in economies not nominally socialist but in which government is involved, even slightly, in economic affairs. If truth were known widely, people could understand more easily why not to involve government in so many facets of existence: education, health, banking, communication, etc. It was the very same year–1920–that Mises laid out his most important other argument: the impossibility of a system “in the middle,” part free and part socialist; that every such system MUST move toward one of those extremes or the other (the idea embodied in his student, Hayek’s, ROAD TO SERFDOM in the late ’40s.

  5. lenin,

    I see that you’re familiar with Mises. To those who aren’t, I recommend the IEA primer:

    The key problem with your post, aside from your failure to provide a credible alternative to the free market, is your persistent desire to include social factors in economic decision making.

    “The question of how to rationally allocate investment, and structure social consumption in a rational manner, involves prioritising needs and wants in a way that requires information that market prices don’t provide. Do you build social housing, raise incomes, or invest in a new marina?”

    Such thinking is short-sighted. Ask yourself who does more for society: the “socially responsible” CEO who builds social housing, or the greedy CEO who invests everything in research, purely to maximise profits. The inventions funded by the second CEO can have a lasting impact on the world, improving living standards for everyone. The “social housing” built by the first gives respite to a small group of people; it does nothing to improve life for future generations.

    Moreover, there is the question of who should decide which projects are socially worthwhile. CEOs are typically playing with other people’s money. Their responsibility is not to society as a whole, but to their investors. It is not right for a CEO to use investors’ money to pursue projects that *he* considers socially worthwhile. His job is to generate wealth, which the investors can then spend on projects that *they* consider socially worthwhile.

    Jamie Whyte puts it well:

    “I can think of no supposedly good cause to which some of my colleagues – and, I presume, many of our shareholders – are not actively hostile. Should we contribute to the distribution of condoms to prevent the spread of Aids? Some think that God abhors contraception. Should we spend money to offset the carbon emissions caused by our travel? Some doubt that carbon emissions cause global warming.”

    In the interests of both utility and justice, people should be left free to dispose of their wealth as they see fit.

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