Economic Calculation in the Socialist Commonwealth
Economic Calculation in the Socialist Commonwealth is the definitive case against Socialism.
In 1920 Ludwig von Mises was alone in challenging the socialists to explain how their economic system would work in practice.
Mises proved that socialism would never work because it did not allow for economic calculation to take place. Since there was no free market, the State owns the means of production, a pricing system couldn’t arise. Without prices, there can be no rational economic calculation.
What products should be produced and in what quantity? Where should the production take place? Which raw resources should be used and how sparingly? Are our processes efficient? These are questions no central economic planning board can decide without a proper pricing system. Without prices, the decisions of the central planners become arbitrary and chaotic and detached from reality.
Mises’ critique delivers a “death-blow” to the supporters of Socialist policies. Any serious student of economics should study this work.
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