Calculation in kind

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Calculation in kind or calculation in natura is a way of valuating resources and accounting based on disaggregated physical magnitudes, as opposed to a common unit of calculation. It was proposed to replace money and financial calculation in a socialist economy.[1] Calculation in kind would value each commodity based only on its use value, for purposes of economic accounting. By contrast, in money-based economies, a commodity's value includes an exchange value.

Calculation in kind was strongly advocated by the positivist philosopher and political economist Otto Neurath in the early 1920s, when much of the discussion about socialism centered on whether economic planning should be based on physical quantities or monetary accounting. Neurath was the most forceful advocate of physical planning (economic planning using calculation-in-kind) in contrast to market socialist neoclassical economists who advocated use of notional prices computed by solving simultaneous equations.[2] Austrian school critics of socialism, particularly Ludwig von Mises, based his critique of socialism on the calculation problem.[3]

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  1. ^ Steele, David (1992). From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation. Open Court Publishing Company. p. 123. ISBN 978-0875484495. The term ‘calculation in kind’ is normally reserved for attempts to dispense with any general unit of calculation. It is usually not taken to include cases where a general unit of calculation is arrived at without reference to money or markets. Thus it is not applied to Taylor-Lange accounting prices, nor to notional ‘prices’ ascribed to all commodities in an attempt to replace the market by solving a large number of simultaneous equations, nor to the use of labor time as a measure of cost. 
  2. ^ Feinstein, C.H. (September 1969). Socialism, Capitalism and Economic Growth: Essays Presented to Maurice Dobb. Cambridge University Press. p. 168. ISBN 978-0521049870. In the years between 1917 and 1925 Viennese socialists were heavily engaged in disputes about these themes. Among the main contributors were O. Neurath, K. Polanyi, O. Baur, O. Leichter and W. Schiff... Much of this early discussion turned round the question whether planning should be in physical quantities or whether monetary accounting should be used. Otto Neurath, a remarkable personality, was a forceful advocate of physical planning. 
  3. ^ Otto Neurath's concepts of socialization and economic calculation and his socialist critics. Retrieved July 05, 2010: http://www.chaloupek.eu/work/NeurathFin.pdf

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