Mises on Economic Calculation   Leave a comment

I’m concluding my series on Ludwig von Mises’ 1920 essay “Economic Calculation in the Socialist Commonwealth”, appropriately enough, with his conclusion of the essay. I highly recommend you read it for yourself to get a fuller understanding of why socialism was a bad idea in 1920 and a bad idea nearly a century later.. Lela

 

He called for socialists to consider their position on a rational basis and realize that socialism does not  match reality. Their system has no way of determining the natural value of anything. Prices must be arbitrarily derived by bureaucrats in a socialist system, while in a capitalist system, supply and demand operate automatically to provide a “market value” price derived through exchange relations. The purchasers of a product determine the price depending on their personal choices.

Ninety-seven years after Mises wrote this essay, he’s still right and the Soviet Union and China have both proven his critiques. The Soviet Union is no more and Russia and the former Soviet bloc countries are largely market-based economies. Many of them are much more capitalistic than the United Kingdom or the United States. Meanwhile, China has taken a halfway position in state capitalism. Lenin thought of state capitalism as an intermediary step toward the paradise of socialism, but having tried social for several decades, China decided to introduce some capitalism.

Image result for image of american socialismName a socialist society that is doing well. There are a few capitalist societies that have a great admix of socialism — the United States, for example. Alaska too. The United States has suffered under a slowing economy for more than a decade now and is currently $21 trillion in debt. Alaska almost didn’t pass a budget this year. Socialism sounds good from the perspective where it hasn’t been tried yet, but inevitably it can’t operate without some market-economy features and so …. The United States has spent many decades slowly becoming more socialistic and our economy is teetering on the brink of collapse. Some observe that we appear to have been coasting on the dynamism of our past capitalism and that is now running out. Just look at the pace of inventions in the US between the end of the Civil War and now. You can see that we had a huge burst of activity and then we slowly fell away in an inverse ratio to the amount of government interference in the economy. So, what does that mean for us now? Is the solution perhaps reintroducing capitalism to the system?

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