ȇȁ Partʺ: EconomicsFurthermore, continual shifts and changes in supply and demand func-
tions themselves would blur the central authority’s view of the effects of
its trials-and-errors.
Still further comments on Lange-Taylor socialism are in order. Like
some of the foregoing points, they are stated most cogently in the writ-
ings of Professor Hayek (ȀȈȃȇ, chaps.ŕŤandŕŢ). For instance, by the very
nature of administrative decisions, such price changes as were made would
occur later than if the prices were determined on a free market. Secondly,
the central price authority would differentiate much less than a free mar-
ket would between the prices of commodities according to differences of
quality and the circumstances of time and place. Ļis means that managers
of production would have no inducement, and even no real possibility, to
make use of special opportunities, special bargains, and all the little advan-
tages offered by special temporary or local conditions. Society could not
make full use of the sort of dispersed knowledge that cannot be collected
in the form of statistics, for example, knowledge of vacant space in the
hold of a tramp steamer about to sail, knowledge of a machine that is not
being fully used, knowledge of a particular person’s skill that might be
better utilized.
Furthermore, theorists of the Lange-Taylor school err in regarding
cost curves as “given.” One function of capitalist price competition is
to reduce costs to a minimum. Under socialism, the new man with the
new idea is not able to enter an industry and undercut old producers
unless the central authority approves his projects und provides him with
capital.
Further comments on Lange-Taylor socialism apply to an even more
decentralized type of socialism as well. I will save these comments until
the discussion of that other type.
Professor Pigou, for one, recognizes the difficulties that would beset
any attempt to apply his Competitive Solution to the problem of socialism.
He says: “Evidently ... the practical difficulty of working such a process
will be enormous.... Far-reaching errors are almost inevitable.” Neverthe-
less, Pigou congratulates himself on the fact that his “analysis shows that
the allocation problem is solublein principle” (ȀȈȂȆ, p.ȀȀȄ). Ļis brings
me to remark that I cannot understand the common charge that critics
of socialism base their case on “merely practical” objections. As Lionel
Robbins observes, “it is one thing to sketch the requirements of the plan.
It is another thing to conceive of its execution” (ȀȈȂȃ, p.ȀȄǿ). Of course
the allocation problem is solublein principle. But it is just as possible,in