Calculation in kind

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Calculation in kind or calculation in natura is a form of resource valuation and a method of accounting based on disaggregated physical magnitudes as opposed to a common unit of calculation. Calculation in kind is often described as the form of calculation and accounting that will supersede money and financial calculation in a socialist economy.[1]

In contrast with monetary calculation, calculation in kind would embody more accurate information about the value of a resource by dispensing with the exchange value inherent to all commodities in money-based economies so that only a resource's use value would remain as the sole basis for economic accounting. Under such a system, an object would only be desired for its utility without being subject to the distortions of monetary calculation - for example, an object would not be desired for functionally useless purposes like resale and speculation.[2]

Calculation in kind is advocated as a method of direct quantification of the utility of a given object or resource that dispenses with any general unit of calculation. It is therefore juxtaposed with other proposed methods of socialist calculation, such as the use of simultaneous equations, Taylor-Lange accounting prices, or the use of labor time as a measure of cost.[1]

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 or not economic planning should be conducted in physical quantities or by using monetary accounting. Otto Neurath was the most forceful advocate of physical planning (economic planning using calculation-in-kind) in contrast to market socialist neoclassical economists who advocated the use of notional prices computed by solving simultaneous equations.[3] Austrian school critics of socialism, particularly Ludwig von Mises, based his critique of socialist calculation on the conception of socialism as a moneyless system with no general unit of calculation.[4]

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  1. ^ a b 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. ^ The Alternative to Capitalism. Retrieved July 05, 2010, from wspus.org "The disappearance of economic value would mean the end of economic calculation in the sense of calculation in units of value whether measured by money or directly in some unit of labour-time. It would mean that there was no longer any common unit of calculation for making decisions regarding the production of goods...Calculation in kind is an essential aspect of the production of goods in any society, including capitalism. A commodity is, as we saw, a good which by virtue of being produced for sale has acquired in addition to its physical use value a socially-determined exchange value. Correspondingly, the process of production under capitalism is both a process of production of exchange values and a process of production of use values, involving two different kinds of calculation. For the former, the unit of calculation is money, but for the latter there is no single unit but a whole series of different units for measuring the quantity and quality of specific goods used in the process of producing other specific goods (tonnes of steel, kilowatt-hours of electricity, person-hours of work and so on). The disappearance of economic or value calculation in socialism would by no means involve the disappearance of all rational calculation, since the calculations in kind connected with producing specific quantities of goods as physical use values would continue."
  3. ^ 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." 
  4. ^ 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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