ŏ Ŕ ō Ŝ Š ő Ş țĻe Debate about the Efficiency of
a Socialist Economy*
Non-academic socialists have in general bothered little about how a social-
ist economy would work. Even Karl Marx preferred to attack capitalism
rather than describe socialism. In popular thought, socialist production
was to be organized very simply, with sole regard to the needs of the com-
rades.
Ļe popular slogan “production for use, not for profit” overlooks the
fundamental economic problem of scarcity. It is simply impossible to sat-
isfy all of everybody’s wants fully. Without some indexes of the intensity
and satiability of wants and of the scarcity of resources relative to use-
fulness, rational economic calculation is out of the question. Suppose ten
more small radios could be produced at the sacrifice of one large television
set. Would national output thereby be increased or decreased? Without
some concept of “value,” the question is meaningless. Suppose a certain
product could be produced either with ten units of land plus five of labor
or with four units of land plus nine of labor. Which method of produc-
tion is more economical? Without some concept of “value,” the question
is meaningless.
When socialism became an immediate political issue at the end of
World War I, the Austrian economist Ludwig von Mises spoke forth to
deny that socialism is economically practicable. Mises’s main argument
can be summarized—as the socialist H.D. Dickinson (ȀȈȂȈ, p.ȀȀȀ) has
done—in three statements:
Ș.Rational economic activity requires the pricing of all goods, produc-
tion goods as well as consumption goods.*Presented in the Department of Economics staff seminar, Texas A&M University
(then College), NovemberȀȈȃȈ. Printed here unchanged except for standardization of the
format of references.Ȇȁ