Chapter Ƕ: Ļe Debate about the Efficiency of a Socialist Economy ȇȄadvantage of imperfect competition by overcharging buyers and underpay-
ing suppliers. If the central authority tried to enforce rigorous adherence
to the “rules,” there would have to be duplication of management and so
perhaps centralized planning after all.
Ț.Managers might not know their own marginal cost curves, even if
determinate. Most important, managers almost certainly could not know
their average revenue curves for the simple reason that such curves would
not exist as independent entities. To be specific, the socialized enterprises
would almost certainly be oligopolies, and the outstanding characteristic
of oligopoly is absence of anydeterminateaverage revenue curve. Notice
that I am not talking about “mere practical difficulties” of measurement.
My point is that neither the most powerful statistical techniques nor the
fact of government ownership could provide an oligopolistic firm with
something nonexistent, that is, with a determinate average revenue curve.
Ļus it appears that the Lerner-Lange-Modigliani rules do not yield
any determinate price-output situation at all. Ļe socialist economy would
simply have to wallow in chaos.
Several observations apply both to Lange-Taylor socialism and to
Lerner-Lange-Modigliani socialism:
Ș.Ļe adoption of competition or quasi-competition means giving up
whatever advantages centralized planning might afford (if those advan-
tages were considered worth the price in terms of grave disadvantages).
For example, competitive socialism has no sure cure for the business cycle.
Dickinson, Modigliani, and others who discuss the problem pin their faith
on what are essentially the sort of Keynesian fiscal policies that capitalism
could adopt. But Beckwith has the most elegantly simple device for get-
ting rid of unemployment: just cut wage rates to whatever extent may be
necessary. With regard to wages, Dickinson and Beckwith declare them-
selves for piece-rates and the other trappings of Taylorism. Incidentally,
few socialist price-theorists try to pretend that their systems hold any
place for unionism as we know it today. To my knowledge, only Lerner
and Lange cannot bear to stop mouthing the shibboleths of contemporary
unionism.
ș.It is questionable whether the diligence and the decisions of social-
ist managers of production would be governed by suitable incentives. As
Mises points out, the capitalist entrepreneur
does not just invest his capital in those undertakings which offer high
interest or high profit; he attempts rather to strike a balance between his
desire for profit and his estimate of the risk of loss. He must exercise