The Economic Calculation Problem Rebuttal Help
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So I made a video talking about the ECP, a guy replied to me and he uses a lot of jargon I am unfamiliar with. Could someone with more knowledge on this particular topic debunk the reply or provide a rebuttal? I’ll write what I say in bold and what he replied to the bold comment in quotation marks, and so on.
Firstly I’m a Libertarian Marxist, so this is mainly a critique of planned economies. Mises’ take on it is kind of shit because he doesn’t take into account internal prices.
“I’m assuming you’re referring to the Lagne-Lerner solution of central planners by fixing account prices within production and attempt to reach equilibrium through trial and error.Hayek’s take is like much superior so I don’t know why you don’t cite him instead
“The Lagne-Lerner model commits several fatal fallacies in its propositions to solve the Calculation Problem. Leaving aside the absurdity of trusting a coercive government monopoly to act as though perfect planning can be reached, it is ridiculously naive to assert general equilibrium can be used to depict the real world. Incessant change, ever shifting market demands and shocks, leaves the capitalist entrepreneur to became a central actor within any economic system. It feels ironic to use trial and error when Mises himself acknowledges in Human Action that this can only work in reaching equilibrium in the capitalist market. There, entrepreneurs are motivated to make greater profits to avoid losses. This criteria does not apply to capital goods or land market under socialism.”
The main issue with the problem is its complete circular logic
“Another flaw within the Lange-Taylor method of trial and errors is its focus on merely consumer pricing, ignoring the reality of the real calculation issue: capital goods/structure and higher order goods. Internal pricing ratios simply cannot be generated for what cannot be exchanged. Higher order goods cannot have an exchange ratio, key for input output models. We also cannot measure interpersonal utility.”
Because it assumes markets plan things perfectly, even though there’s enormous waste, pollution and economic crashes.
“In terms of capital structure as I have previously illustrated, this further shows the impossibility of calculation under socialism. Pointed out by George Halm, he outlines the issues with Walrasian equilibrium as well as their lack of genuine capital theory. Because capital is no longer owned by many private persons, but by the community ,which itself disposes of it directly, a rate of interest can no longer be determined. A pricing process is always possible only when demand and supply meet the market. In the socialist economy there can be no demand and no supply when the capital from the outset is in the possession of its intending user, in this case the socialists control authority. Now it might perhaps be suggested that, since the rate of interest cannot be determined automatically, it should be fixed by the central authority. But this likewise would be quite impossible. It is true that the central authority would know quite well how many capital goods of a given kind it possessed or could procedure, it would know the capacity of the existing plant in the various branches of production, but it would not know how scarce capital was. For the scarcity of means of production must always be related to the demand for them, whose fluctuations give rise to variations in the value of the good in question. If it should be objected that a price for consumption good would be established, and that in a consequence the intensity of demand and so the value of the means of production would be determinate, this would be a further serious mistake. The demand for means of production, labour and capital goods is only direct.”
Like the fact we have enough food for 10 billion people worldwide but 9 million people starve to death every year. Plus the problem itself is entirely self-defeating, because all the arguments can apply back to capitalism
“You ignore internal pricing ratios cannot solve numerous issues, one major one being the train problem: in order to build a railroad from city A and city B, but because the cities is a mountain range. Suppose planners were to know the railroad would serve the nation equally well if the railroad were to be build around the mountain or through it. How do the planners decide where to build the railroad? Through communal surveys? This merely walks into the knowledge problem. Without a pricing mechanism, not only can we not ever know the most socially beneficial use of finite resources but then face this issue in the production process of all other capital goods. You mention negative externalities, committing uncountable fallacies and strawmans of the Austrian position. I will merely run through your examples as they are not worthy of addressing. (A) pollution occurred at a higher rate in the USSR under central planning (B) you ignore the ate has made it more profitable while also assuming perfect knowledge can exist, using this to lead onto Cockshott’s rebuttal which is comical at best (C) economic crashes. I cannot tell if this is satire but is certainly indicative you’ve never read Mises nor understand Austrian Business Cycle Theory.”
In order to innovate you need to improve your production processes and planning.
“Moving onto “circular logic,” this just further demonstrates your illiteracy on what the calculation problem entails. Can you point as to where Mises, Hayek, Kirzner ever asserted that capitalism has perfectly dispersed knowledge exists of the individual? Please cite where. Cockshott himself concede the USSR resorting to monetary targets in calculation proved Mises’ point on calculation. Yet i’ll ignore this, i’ll reiterate my question – WHERE DID ANY AUSTRIAN SAY PERFECT KNOWLEDGE EXISTS UNDER CAPITALISM.”
If there’s a magic limit where the problem kicks in, then there’d be a cap on the growth of capitalism, enterprises would become too big to plan and it’d be impossible to innovate further.
“Is this a point on the TRPF or stifling of innovation? As both are completely wrong. You have not managed to actually attack the Calculation Problem by screaming “internal pricing ratios” and then proceed to strawman the calculation problem by pivoting as though Austrians claim capitalism produces markets plan perfectly”
Thank you, any help appreciatedThere will be others replying to your query more informed about the specifics of your exchange but, in the meantime, if you haven’t read them, here is the WSM rebuttal of Von Mises which is not the same as Paul Cockshott’s or other market socialists.
https://www.worldsocialism.org/wsm/2020/11/08/the-economic-calculation-controversy/
And also here
Libmarxist- I originally drafted a reply, but realised AJ posted one with a link more to the point than mine.
I know you ask a question- but I have one for you.
It is based on your choice of name.
Why libmarxist? In the spirit of anthropology: what is ‘lib’ to you and what is ‘marxist’?
That way, I can contextualise your question better: but the answer needs what you believe or value- other than your questions of others.
Short answer: Mises & Hayek are basically criticising socialism for not being capitalism. Socialism would be about achieving definite ends, as opposed to capitalism’s search for potential infinite profits. What would matter in socialism is that society achieves the goals it sets itself, even if that includes chucking more labour at a given problem than strictly required (so long as all other ends are achieved).
An illustration I use from history: a lot of people marvel at Stonehenge marvel at how those blue stones (weighing over a ton each) could have been moved by stone age people. Suggesting all sorts of efficient ways they could be rolled, etc. An Indian expert in ancient monuments took one look and said: “They picked them up.” The fact was, there were lots of them, and part of the point of moving them would have been to demonstrate how powerful a chief was (and how many followers he had). The incentive there was not to spare labour, but in fact to maximise labour inputs, the total opposite of capitalist rationality.
I suppose in terms of “Libertarian Marxism,” I have a few influences:
Firstly, I believe Marxism, as an ideology is much more widespread and applicable than people believe it to be. Even non-socialist ideologies like social democracy emerged from a more “reform > revolution” conception of Marx’s writings. In fact most of left-leaning politics, from what I’ve read, emerged from Marx. I’m still undecided to an extent whether I am a full-on anarchist or not, I would need to read more on the subject. But essentially, I believe in the teachings of people like say, Chomsky, Luxemburg, CLR James etc. Also, I believe one can be a Marxist without being a Socialist; in fact I believe most left-leaning people, even liberals, would agree with many of Marx’s thoughts on capitalism itself; they simply disagree with the alternative and come at it from a more reform-perspective; that’s irrelevant though, since I am a socialist.
However, I don’t believe the problem itself is applicable in terms of anarchism/libertarian socialism; it’s mainly a critique of centralisation, which is why I was coming at it from that perspective.
Your critic seems to be assuming that you were advocating a system of central planning (as proposed by Lange, Lerner, Taylor, etc) in which the state tries to price goods at the same level that they would be if the market had been allowed to establish them. This wouldn’t be socialism but some form of state capitalism. The critics might be right that such a system wouldn’t work, at least not for long or not as intended but it is not what socialists advocate.
Socialism is a system where, on the basis of the common ownership of productive resources, goods and services are produced directly to satisfy people’s needs. The problem socialist society will have will not be how to sell what has been produced (since what is produced will be commonly owned) but how to distribute it to people for them to satisfy their needs.
In some cases this could be by the direct allocation of something; in others by the provision of a free service; in yet others it could be left for people to take from the common stores what they consider they need. In all cases there would be no buying and selling, no pricing and no money. It is this that the partisans of the ECA say is impossible and irrational.
Their arguments are full of holes.
When Hayek’s argues that when people buy something they are voting for that to be produced he ignores — in fact accepts — the unequal distribution of purchasing power under capitalism with what the majority can buy being rationed by how much they are paid as wages.
It’s the same with Mises. He criticises socialism as not been able to make rational decisions about production but that’s because he defines rational as decisions made by the market. But that is not the only definition of rationality.
Both of them are assuming that “scarcity” exists but, again, this is a matter of definition. They define this not in the usual sense of a shortage of something or an inability to produce enough of it but as the absence of “sheer abundance”(everything growing on trees waiting to be picked).
Here is an example (there are others, but this is the only one in the internet) of a polemic against an ECA critic of socialism refuting their arguments point by point. There might be something there you could use for your rebuttal.
Incidentally, can your video be seen somewhere?
I saw that reddit did a post on this and I found this one: https://www.reddit.com/r/DebateCommunism/comments/fg66vc/what_do_you_guys_think_about_mises_economic/
Where the top comment begins with…
“The way Mises formulated the problem has been debunked, as Mises argued that it is impossible to economically calculate prices at all in a socialist economy since there is no exchange. He does not consider the possibility of the socialist economy setting internal prices, not as an expression of market value, but as an expression of alternative options in order to move resources between enterprises. For example, five bananas might be an alternative for three apples, and to keep things simplified and consistent, an internal price is assigned where five bananas = $1 = three apples. Theoretically, through enough data and math equations, a socialist economy can possibly calculate efficient prices…”
So this would be state capitalism?
Also, quite stupid: the video is a tiktok video lol.
Well, it wouldn’t be socialism since, in a socialist society where both the means of production and the products would be commonly owned (ie belong to no one or no group within society), why would there be a need to put a price on everything? You only need to that when a section only of society owns the means of production and needs to sell what is produced.
Perhaps today, given the enormous development of computing power since the days of Mises, Lerner, Lange and the others, it might be theoretically possible for a computer or network of computers to second guess the prices that the market would produce, but what would be the point?
To organise the production and distribution of goods and services, even under capitalism, there needs to be calculations in physical units (tonnes of steel, kilowatt hours of electricity, so many workers with a particular skill, etc). But, in order to calculate profits, capitalism needs to duplicate this “calculation in kind” with a calculation in money as a general unit of account. In socialism this duplication will be unnecessary. The calculation in a general unit of account is dropped and we calculate just in physical quantities.
This chapter from our pamphlet Socialism As A Practical Alternative sets out how a socialist society could organise the production and distribution of wealth without money:
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