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The Impossibility of Socialism

Economic Calculation in the Socialist Commonwealth
by Ludwig von Mises (1920)
In this essay Mises criticizes socialism (in short socialism is impossible because it does not provide means for rational economic calculation and decision making). In doing so, he has to talk about what socialism says. He makes a good attempt to give a fair and reasonable interpretation. One of the things he says is socialism differentiates between consumption goods and the means of production. If a socialist citizen wishes to trade his allotment of beer for his friend's allotment of concert tickets, that's allowed. But there can be no trade of the means of production because they are communally owned.

That makes sense because otherwise the planners have to know everyone's tastes so they know who to give beer to and who to give concert tickets to. (Or they can try a rather implausible scheme such as making everythign free for the taking and asking people to only take modestly.)

There is a problem here: this distinction rests on a naive and false conception of the kinds of goods that exist. It assumes household cleaners are for consuming and hammers are for producing and every good is is one type or the other. This is false. Consider the Macbook. This is a consumer product which people use to play games, but it's also a means of production for programmers, video game artists, people who need a spreedsheet program to manage a warehouse or factory, architects, and sales people who need to create presentations.

Even household cleaners can be used in production (to make drugs, for example) and hammers can certainly be used for either hobby work or professional work. Jewelry can be melted into gold or silver which can be used in production. Factories can be remodeled into living spaces. There can be no distinction between consumer and productive goods.

This is not Mises' problem. It is socialism's problem. If socialism wishes the factors of production to be communally owned, but for consumption goods to be privately owned, then it's socialism's problem to (impossibly) draw a distinction between the two.

My conclusion is that socialists have a choice:

1) Socialism is impossible.

2) Socialism must intrude into its citizens' entire lives: everything is communally owned and its use determined by the planners.

3) Socialism must make arbitrary declarations about which goods are to be communally owned and which not. Doing that will cause economic harm by preventing goods from switching categories even when doing so is efficient.

Elliot Temple on January 12, 2011


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