Is the Market a Test of Truth and Beauty?

Chapter Ƕ: Ļe Debate about the Efficiency of a Socialist Economy ȆȂ

ș.Pricing requires the existence of a market.

Ț.A market requires the existence of independent owners of the goods

exchanged.

Listen to Mises’s own words:

In any social order, even under Socialism, it can very easily be decided

which kind and what number of consumption goods should be produced.

No one has ever denied that. But once this decision has been made, there

still remains the problem of ascertaining how the existing means of pro-

duction can be used most effectively to produce these goods in ques-

tion. In order to solve this problem it is necessary that there should be

economic calculation. And economic calculation can only take place by

means of money prices established in the market for production goods

in a society resting on private property in the means of production. Ļat

is to say, there must exist money prices of land, raw materials, semi-

manufactures; that is to say, there must be money wages and interest

rates. (ȀȈȁȁ/ȀȈȇȀ, pp.ȀȃȀ–Ȁȃȁ)

At about the same time that Mises’s famous article appeared inȀȈȁǿ,

similar ideas came from the pens of Max Weber in Germany and Boris

Brutzkus in—of all places—Russia. Brutzkus, for instance, wrote:

just as capitalism possessed a general measure of value in the rouble, so

socialism would have to possess an analogous unit for the evaluation of its

elements....Without evaluation any rational economic conduct, under what-

ever kind of economic system, is impossible. (ȀȈȂȄ, p.ȀȄ; italics in original)

Mises, Weber, and Brutzkus were not the first writers to question the
economic efficiency of arbitrary planning. For instance, as early asȀȈǿȁ,
the Dutch economist Nicolaas G. Pierson (ȀȈȂȄ, pp.ȃȀ–ȇȄ) had empha-
sized that a socialist community would have to face the problem of value.
But it was left for Professor Mises to revolutionize academic discussion.
Ļis Mises accomplished by his dogmatic insistence that rational eco-
nomic calculation under socialism would be impossible. In Mises’s own
words, “Every step that takes us away from private ownership of the means
of production and from the use of money also takes us away from rational
economics” (ȀȈȁǿ/ȀȈȂȄ, p.Ȁǿȃ).
Ensuing discussion of how to avoid the pitfalls stressed by Mises be-
came reminiscent of an article published by Enrico Barone inȀȈǿȇ. In his
“Ļe Ministry of Production in the Collectivist State,” Barone had applied