Talk:Economic calculation problem

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The change on November 4, 2005 was me. (I don't have a Wikipedia account yet but this is my internet moniker ;))

I reorganized the debate section to move the discussion of decentralized socialism as a potential solution to its own section. This makes clearer the pre-existing fact that the rebuttal and reply subsections referred only to this issue.

I added a summary of the socialist argument based on the existence of centralized planning in actually existing capitalism. This is commonly heard, in my experience, because it's a fairly simple reply.

(Anti-socialist responses to that argument, and the 'philosophical objection' below it, would be welcome additions. I'm not going to provide them as, since I don't believe them, I'm not sure I could formulate them fairly. Please don't simply remove anything, though.)

I also made a few minor changes in wording to make sentences clearer, at least to me.


The change on 18:10, 22 Sep 2004 was me (Gregholmes). I forgot to log in first.

I may have seen the example that I added somewhere, but I can't remember where.

Moved from article[edit]

Furthermore, decentralist socialists would argue that there is no need for a common unit of accounting or, rather, that such a need only derives from the exigencies of economic exchange i.e. as a more efficient form of exchange than barter. In capitalism costs are measured in monetary terms. It is a tautology to argue that only a monetary-based system can measure costs in this fashion. On the other hand, if monetary accounting is supposed to "capture" costs in some other substantive sense one would then have to demonstrate a correlation between these two kinds of "costs". Since this would entail measuring costs directly and not in terms of money, if follows that the economic calculation argument is logically inapplicable.

I don't entirely understand this, but I know its POV ;) [[User:Sam Spade|Sam Spade Arb Com election]] 21:56, 29 Nov 2004 (UTC)

"A continuing debate"?[edit]

"A continuing debate"? Who still questions it? Even Soviet communists accepted that Mises was right! User:Tacitus Prime (comment moved from now merged Talk:Economic Calculation Debate, sig added by [[User:Sam Spade|Sam Spade Arb Com election]] 12:00, 1 Dec 2004 (UTC))

  • It's pretty widely criticised. Bryan Caplan, who is sympathetic to the Austian school on many things, devoted section 3.1 of his Why I Am Not an Austrian Economist to why he thought the Misean argument is incoherent. Robert Allen's "Farm to Factory : A Reinterpretation of the Soviet Industrial Revolution" [1] [2] (one of two winners of the 2005 Ranki Prize of the Economic History Association) provides an account of the economic history of the USSR from 1928-1942 that is hard to square with Mises being right. --- Charles Stewart(talk) 20:52, 21 February 2006 (UTC)
Caplan's argument is that the incentive problem was enough to cripple the Soviet Union even without the calculation problem, not that socialist economies perform economic calclation as well as capitalist ones. He agrees that inability to calculate poses a major problem to socialist economies, just that the point at which it starts to apply is theoretically undefined. He's even used it as a basis to critique interventionism. I haven't read Allen's work, but I can't imagine how it would refute Mises argument unless it argues that "The socialist economy allocated resources near optimally given the effort the workers put in", which I seriously doubt it does. No one has proposed a widely accepted method for performing economic calculation under socialism. That's why I think User:Sam Spade was questioning the "continuing debate" bit. MrVoluntarist 21:02, 21 February 2006 (UTC)
  • Sam Spade was not doing the questioning, it was Tacitus Prime. Caplan's argument assertion is that (i) the failure of Soviet Communism can be attributed to the incentive problem, and that (ii) the economic calculation argument doesn't work. Mises doesn't argue that socialism is not optimal, which would not be a strong argument against socialism or marginally less efficient than capitalism, but that a wholly planned economy cannot support industrial levels of wealth without outside assistance. The claim, and I haven't come to a conclusion about the evidence, is that Stalin's five year plans successfully delivered growth in excess of the rates achieved in Europe (though lagging the growth in the USA), and did so without market mechanisms. --- Charles Stewart(talk) 22:32, 21 February 2006 (UTC)
  • Interesting. Would not a counter-argument be that the Gosplan planners had access to Western prices for numerous commodities and products?Ultramarine 22:56, 21 February 2006 (UTC)
That's precisely how Mises explains how they could function. Caplan replies that did nothave a notable effect on the outcome, since the planners outright ignored the information from the outside that they didn't like. (Mises probably would have responded that this was praxeologically impossible -- they can't act "as if" they don't see the outside world.) Note that their of them denies the need for prices to direct production, and socialists' inability to come up with one. MrVoluntarist 23:02, 21 February 2006 (UTC)
  • Yes, this is an important counter argument. If Mises made this claim, it would be good to have a citation. Of course it leaves open the question of how necessary this source of information was to the Soviet economy. --- Charles Stewart(talk) 15:36, 22 February 2006 (UTC)
Charles_Stewart: you have an odd conception of what "doesn't work" means. Caplan doubted some of the more extreme claims based in the calculation argument. He has written papers that specifically agree that lack of price signals poses fundamental problems for socialism. You don't have to accept Mises's more extreme claims to regard the argument as a devastating blow to socialism. As for the paper, I don't know how five years counts as "sustained", and I think the paper (if you've represented it correctly) responds to Mises point -- you can build factories all day. You can dig holes and fill them up all day. The crucial question is whether these "productive" activities actually satisfy human desires. Plus, there's that nasty issue of the famine. I can create sustained growth without markets too, if you cut the test off at five minutes and ignore all starving people. MrVoluntarist 23:07, 21 February 2006 (UTC)
  • It doesn't work in the sense that it doesn't establish the conclusions that Mises claimed. Caplan does agree with the Hayekian view of economic calculation, that socialist economies are deprived of a source of economic information and thereby are inefficient, but he says it is entirely open how much inefficiency this entails, and that only quantitative economics can settle this. And of cource the Hayekian view is rather different to the Misean view in this respect. Allen's work is a book, the links I gave contain only an incomplete summary, and I don't have access to the book right now, though I am fairly confident what I said is a faithful recollection. --- Charles Stewart(talk) 15:36, 22 February 2006 (UTC)
The article isn't about "Mises's calculation critique". The article is about the general economic calculation problem. That has no ongoing debate, i.e., there is no widely accepted answer to how socialist economies replace the pricing information for optimizing efficiency without just falling back on the market. That may change, if someone comes up with a great idea. We'll know when it happens, but it hasn't happened. MrVoluntarist 16:59, 22 February 2006 (UTC)
Postscript Allen's book claims that the Soviet Union had a robust economy from the beginning of the first five year plan in 1928 until planning went off the rails in the late 1960s or early 1970s. The period of Stalin's first three five year plans is most interesting, because this 14 year period appears to have had no market mechanisms at all, had the most instability (the purges, mass starvation during the failure of agricultural collectivisation, military defeat by the Finns) and yet delivered higher economic growth than Western Europe. --- Charles Stewart(talk) 15:42, 22 February 2006 (UTC)
I still don't see how this is a refutation of Mises's argument. He didn't define success by the usual metrics of conventionally-counted GDP. He never denied that government can spend spend spend and then say "hey, look at GDP growth!". The question is whether those factories satisfied actual human desires. Given the extreme flux of people from the Soviet Union to the USA in that time period, and the relative ease of acquiring necessities in the US, it seems Mises was completely correct on this. I agree that the paper would refute the argument "Socialist economies can't fool the Keynesian GDP metrics" thought. MrVoluntarist 16:59, 22 February 2006 (UTC)
I haven't read Mises in the original, but instead Steele's summary of the economic calculation debate. Steele is very clear (as is Caplan) that Mises was not arguing that socialism is relatively inefficient, but that it cannot support an industrial economy at all. It is hard to reconcile this claim with the scholarship of Allen. Ultramarine gives a possible basis for a reconciliation. --- Charles Stewart(talk) 19:39, 22 February 2006 (UTC)
Higher economic growth is by itself not evidence for superiority, a developing economy should have higher economic growth than a developed nation. Compare China today with Western Europe. Here are some interesting links:[3][4] The Soviet Union achieved growth in essence simply by being blessed with many natural resources, similar to "growth" in oil states. "By contrast, growth in western capitalist economies originates predominantly from improved use of resources, rather than increased use of resources." Also, arguably the Soviet Union achieved growth by sacrificing its environment and the health of its people. Ultramarine 17:02, 22 February 2006 (UTC)
The first reference you give pretty much conflicts with Allen's characterisation of planning as being successful from 1928 until the mid 1960s: maybe we should email one of the authors and ask about this? The second supports it: the author claims that the health and consumption of the Soviet population improved until the mid 1960s and then went into decline. The point about sacrificing the environment seems besides the point wrt. the economic calculation argument, which doesn't involve any notion of natural capital: I rather doubt that Mises would have been sympathetic to the idea.
BTW, Allen's book is on google books [5]. Page 6 says that between 1928 and 1970 that the USSR's growth rate exceeded that of any other developing country save Japan. --- Charles Stewart(talk) 19:39, 22 February 2006 (UTC)

I haven't read this wiki article before, but this subject is one on which I have spent ten years of work, and Caplan's quote as it's written bothers me because it's too easy to misinterpret:

1) Caplan's argument is reducible to this statement: "between price signals for planning and incentives for coordination, the greater problem is the one of incentives." The problem of incentives without prices manifests itself in a multitude of behaviors. That multitude of manifested behaviors renders a planned economy impossible. He has stated repeatedly that his criticism is one of subtle priority.

2) The dispute between the priority of prices and incentives is an artificial distinction. Just as one cannot have a principle of voluntary transfer without the institution of property, one cannot have the institution of prices without human incentives. And prices have no meaning without incentives. The two concepts are inseparable. Incentives require choice, and prices are required to choose between multiple alternatives. Just as voluntary transfer has no meaning without property. While incentives can exist without prices -- fear, want, belonging, security, barter and the like -- they are limited to simple goods that we can use or consume ourselves. In and industrial economy those goods are abstractions that we cannot grasp the use of with our senses (specialty metals, chemicals, tools). They require special knowledge that one must have an incentive to acquire. So without prices, planning in an industrial economy consisting of factors of production that can be put to multiple purposes in real time, cannot be organized into any rational plan by the multitude of people required to produce any single good. (See I Pencil/I Hamburger). ergo: while the human mind can conceive of an artificially constant organization of individuals, resources and means of production once it is already known, and once individuals possess the appropriate knowledge -- an industrial economy is impossible to FIGURE OUT and it is impossible to SUSTAIN without prices and the impact of those prices on incentives. Humans lack the information to make decisions, but decision making is only important given that they need to have incentives in order to perform the work. Mises doesn't so much overstate his case, as he is simply more concerned about the problem of money and calculation given the events of his time.

3) The problem for any economy functioning in an equilibrium (competing with other economies) is that competition forces constant recalculation of the use of factors of production, and the organizations that such factors of production are used by. The problem for any economy dependent upon natural resources (food) as a means of production (feeding people), and where production requires time (seasons), is that nature does not adhere to plans and is subject to black swan effects (natural disasters). And it may be impossible to 'replan' in real time without irreparable effects (starvation) because of the lack of prices and incentives.

4) We might also put Caplan's statement in context: GMU's Austrian Economists are in an identity clash with the Rothbardians from the Mises institute. The rothbardians have appropriated the terms 'libertarian' and 'austrian economics' by adopting Alinsky's marxist model of propagandizing. Because the Rothbardians have been so successful in doing so, this has caused the only university department in the USA that actively promotes Austrian theory, to defend its theory from ideological if not intellectual abuse, for market reasons. (I am not criticizing the rothbardians, just pointing out the motivations involved. All publicity is good publicity.) In effect Caplan is not commenting about Mises and his economics, he's commenting about the Rothbardians and their political movement.

5) Below RafaelG points to an paper by Boettke supposedly refuting Caplan. Accusing of Caplan not understanding the arguments Mises was making about Socialism. This is somewhat of a comedy of errors, because in his attempted refutation, Boettke makes that mistake, and Caplan does not. Caplan is not arguing against Misesian era socialism, and the stipulation by socialists that the problem of scarcity would be solved by state ownership of property. He's from a younger generation. He is arguing against his generation's problems of social democracy (private ownership of property, public ownership of profits, which we call redistributive or progressive social democracy.) In this new context he's saying that incentives matter more than prices, and that there is too much being made of the price issue, rather than the behavioral issue. He's addressing current issues. In particular the Rothbardian over-emphasis on prices in relation to current socialistic arguments. So Caplan's critique stands to date. And if we were to ask Block, Herbner and Solerno, who wrote most of the papers on the subject, and all of which I have read repeatedly, they would say that the debate has closed. (I know. They've told me in person.) There is no meaningful difference between the price and incentive arguments. The importance of each has more to do with the emphasis needed to address each generation's attempts to protect private property, because the two instantiations of socialistic behavior (socialism and democratic socialism) attempt to appropriate different aspects of property: the means of production by socialists, and the results of production by democratic socialists. Socialism failed because of the inability to both plan and provide incentives. Democratic socialism to some degree continues to survive because it allows (rental?) ownership of property which allows economic calculation and does not appropriate so much of the proceeds that we fail to have the incentive to work. (in most cases.) In fact, in the literature to date (and there is a great deal of it) economists on the left attempt to figure out how much more can be taxed without negative aggregate effects on the economy. They estimate it is much higher.

I hope this was helpful. Curtd59 (talk) 12:45, 4 April 2012 (UTC)

Two points[edit]

Just for clarity:

1. The aim of my argumentation is not to hold up the USSR as an enviable model. It is to show that the evidence does not support the economic calculation argument in the way that many suppose. Caplan's point, that calculation problems did not seem very prominent amongst Soviet worries, is as cogent as Allen's claims about the success of Soviet planning.
2. There seems to be some doubt as to what the economic calculation argument actually establishes. Does it show socialism to be impossible? Or that socialist economies will have lower standards of living that capitalist economies? Or that socialist economies can be rather efficient but will have certain inefficiencies? The article should be clear on this but is not. There doesn't seem to be any doubt amongst scholars that Mises claimed the first.

I'm not an expert on this, and I don't know how best to incorporate my objections into the article, but I'm pretty sure they will help to make for a much more interesting article. --- Charles Stewart(talk) 19:39, 22 February 2006 (UTC)

"Actually there is a refutation of Caplan arguments:

And the Soviets did have economic calculation problems:

"If all the factories and workshops together with the whole of agricultural production are combined to form an immense cooperative enterprise, it is obvious that everything must be precisely calculated. We must know in advance how much labour to assign to the various branches of industry; what products are required and how much of each it is necessary to produce; how and where machines must be provided. These and similar details must be thought out beforehand, with approximate accuracy at least; and the work must be guided in conformity with our calculations” (Bukharin and Preobrazhensky 1966 [1919], 70)"--RafaelG 01:52, 5 July 2006 (UTC)

Resources on Allen's From Farm to Factory[edit]

Robert Allen did a summary of his book [6]


1. Mark Harrison [7] (PDF)
2. R. W. Davies [8]
3. Simon Clarke [9]
4. Paul Josephson [10]

Josephson's review is pretty critical, claiming there isn't much value to the kind of study Allen performed, but the other 3 generally seem to be impressed by Allen's analysis. --- Charles Stewart(talk) 20:48, 22 February 2006 (UTC)

Allen arrived at this "proof" of Soviet success by adding up the consumption of those who did better under Stalin, while omiting data on all those who starved. To quote Allen "output per head could only be increased by reducing the number of heads". Allen's work is laughed at by serious scholars, I have heard it... —Preceding unsigned comment added by (talk) 11:20, 21 October 2010 (UTC)

optimum economic settings[edit]

"It could also be argued that the philosophical basis of the calculation problem has a flaw. Proponents argue that optimum economic settings are unknowable but also purport to know that the market can provide them." I've mentioned Pareto efficiency. Really I cannot think of any reasons that his piece can stand, but maybe someone can give a cite for details? Intangible 00:41, 5 July 2006 (UTC)

Maybe we're just interpreting it differently. To me, that paragraph simply says "those who support the calculation problem argue that (1) it is impossible to find out what kind of distribution of wealth and resources is best, and (2) the market provides the best distribution of wealth and resources". Obviously, if you can't know which distribution is best, then how do you know that there isn't some possible distribution that is better than the one provided by the market? (note that Pareto efficiency only refers to the best distribution you can get without redistributing wealth) -- Nikodemos 00:47, 5 July 2006 (UTC)
Ah, because of these same economists claiming that interpersonal values cannot be compared (marginalism), because value is subjective. Intangible 01:19, 5 July 2006 (UTC)
Why is the paragraph being removed? 01:12, 10 July 2006 (UTC)
Who are those proponents? Intangible 01:14, 10 July 2006 (UTC)

Needs a clean up[edit]

1)The extended explanation strikes me as incorrect - the problem isn't that the price of consumer goods is unknowable, or even that demand is unkowable, but that without a market in ccapital goods you cannot rationally choose between methods of production - least that's my reading of Mises. The destruction of the distinction between producer and consumer, and teh break of the link between production and consumption righst (through wages and profits) seems to be at the heart of this - I'll make changes later unless anyone drastically disagrees.--Red Deathy 07:44, 27 July 2006 (UTC) 2) The stuff about prices and price controls isn't relevent, Mises made clear that a market in consumer goods could exist (i.e. with prices and everything) but the problem would remain so long as there was no market in capital goods. he freuqently mentioned that demand for conumer goods could be known. but the problem would be choosing rational economic methods to produce them. Finally, although clearly opposed to LTV he maintained that marginalism/ltv debates were beside the argument, and the ECP held even if you applied labour time theory. 3) My next set of changes will be: i) Purge much of the debate section ; ii) Start citing reference to back claims up. Any help in cleaning up this very important article would be appreciated.--Red Deathy 08:07, 28 July 2006 (UTC)

There is a difference also between the Mises' argument (calculability) and Hayek's (knowledge). Intangible 20:53, 30 July 2006 (UTC)
True, however demand could be met without being known (as it were) so I think the point about capital goods is more restricted and more relevent. Anyway, I've tried to upgrade teh example, althoiugh the original was taken straight from Mises it wasn't informative and wasn't really an example more of a short illustration. I've tried to convey how complicated simple economics can be.--Red Deathy 07:35, 31 July 2006 (UTC)
Tidied (IMNHO) extended explanation. Removed the zero sum stuff, which didn't strike as quite correct - the argument that you cannot have optimal production, doesn't necessarilly mean that you'll have shortages of goods (it could just mean you put in twice as much effort as is necessary to produce them - yes, that excess effort could have made other useful goods, or equally it could be used to have teh good of leisure time). Later this week I really will purge teh debate section.--Red Deathy 08:04, 8 August 2006 (UTC)


Now, I am not stupid but this article doesn't seem to make sense. Is it the article or is it the theory? I have a basic grounding in economic principals and business studies but this just doesn't seem to fit. For example, it seems that part of the article argues that prices for goods couldn't be calculated due to there not being any way to calculate their production costs. This would be easily be countered by looking at things in terms of man-hour cost... Or am I just missing the point? -Localzuk (talk) 21:04, 2 September 2006 (UTC)

No, it is arguing that without a free market in capital and capital goods you cannot have a rational complex economic system - competetive production techniques could not make themselves known and that the various distributed utilities across the economy could not be satisfactorilly realised. That's the theory, anyway.--Red Deathy 07:22, 4 September 2006 (UTC)
You see, this is the problem. The article does not cover enough of the basics for a lay person to understand the theory. I think the article needs work to remove what I see as a high level of jargon and allow a normal person to understand at least the basics.-Localzuk (talk) 16:59, 4 September 2006 (UTC)
Well, the example is meant to do just that, and it reads clearly and relatively jargon free to me.--Red Deathy 07:07, 5 September 2006 (UTC)

Localzuk, I think you are in fact missing the point. I'm going to respond to what you have said with my "junior economist's hat" on and see if it generates ideas for how to better present the material. You say that the problem of not being able to calculate production costs can be handled by looking at man-hour costs. However, this doesn't solve it. For one thing, man-hours are heterogenous. You may have an expert blacksmith who has various skills, a carpenter who has various skills, etc, and then lots of people only good at grunt work. If a task takes one hour of the expert carpenter, or a half-hour of each of the grunts, which option should be used? And then man hours aren't the only input. There's also the land. If one task takes more man-hours but less land, is it better? Or is it better to use more land and fewer man-hours? And then time: if it takes more man hours but gets it done sooner, is that preferable? To determine the best use, you have to have an exchange ratio by which to compare all of these, and that in turn requires a market in which such preferences can become concretely revealed. Does that answer what you were asking? MrVoluntarist 21:38, 5 September 2006 (UTC)

I th9ink that kinda of misses the point of the ECA - it's not so much about consumer markets (per se - though they are important) but that there are no capital markets, Mises dealt at length with the idea that you could have a market for consumer goods without a capital market, and things would still go arse over tit. The Hayekian argument could be answered through distributed us of IT, but the problem of deciding how to defer consumption (i.e. invest "capital") would remain.--Red Deathy 07:33, 6 September 2006 (UTC)
Wha? Did you actually read my post there? I didn't "miss the point" of the ECA, I was explaining it at base level in the context of a specific discussion. Second, I did mention capital markets: "And then time: if it takes more man hours but gets it done sooner, is that preferable? " Let's try to be a little more thorough in reading others' posts. And less gratuitous obscenity would be nice too. I'm not a prude, but do you really have to chase opportunities to swear down a dark alley, beat them up, and then carry them here? MrVoluntarist 14:37, 6 September 2006 (UTC)
Sorry, the focus seemed to be on the consumer market end of things, which I think is a persistent fault in ECA debates, generally. What obscenity?--Red Deathy 15:28, 6 September 2006 (UTC)
My "focus" was on explaining the ECA to Local in layman's terms so that through a discussion here we could come up with better ways to present the material, not to give the be-all, end-all of defenses of the ECA. That's what this page is for. As for obscenity, you really didn't need to refer to "tits and arse". I haven't seen the expression you used that contained that before, so it didn't add to anyone's understanding. Just say what you mean. You don't get bonus points for your cliches here. MrVoluntarist 17:10, 6 September 2006 (UTC)
Oh, that phrase, it's Yorkshirespeak, and it's pretty self explanitory. I merely, and politely, commented on your simplified explanation, suggesting that it might be in some part eroneous, so as to better add to the chances of improving the article, and got me hand bit off.

I have read this article several times and I am pretty adept at getting new ideal quickly, I cant getfrom this article. it is very confusing to me.----

It's a very difficult topic - could you give us a few lines on what you think it's about, so perhaps we can see a way to clarify it?--Red Deathy 14:04, 24 September 2007 (UTC)


In line with oterh criticism sectiosn of articles, I've stripped this one of twoing and froing, the article per se sets out the case for ECA, let the criticisms stand for themselves. This is a preliminary to strengthening the wording of the remainign criticisms sections. One bit at a time.--Red Deathy 13:44, 27 March 2007 (UTC)

There is no excuse for violating NPOV by massively deleting opposing views. Other criticisms articles and sections include counter-arguments.Ultramarine 14:16, 27 March 2007 (UTC)
Hardly violating NPOV -the older version had a 'on one hand and the other' feel many of which were simply restatements of the original proposition. Let the criticisms stand on their own, as happens in both the Socialism and Capitalism articles. Articles that read like a debate are oor. Besides it's a false sort of NPOV to have that, the description of the article itself should set ouit the "case for" the ECA, and then just mention the critciisms (which are currently badly worded, IMNSHO.--Red Deathy 14:34, 27 March 2007 (UTC)
Again, deleting opposing views is simply not acceptable. Read the policy. You may reorganize, but do not delete them.Ultramarine 14:38, 27 March 2007 (UTC)
AFAICS the opposing views to the critciisms section are in the first three paras, I'll try and reorganise, and tidy, I can see two small sections that can go, and one that's long and pointless, I'll defend in the change statements.--Red Deathy 14:41, 27 March 2007 (UTC)
Again, read about NPOV. You are not allowed to remove opposing views. Wikipedia is not a soapbox for one side.Ultramarine 16:09, 27 March 2007 (UTC)

p.s. My purge of external luinks, there were far to many, and I've only left primarilly primary soruces setting the case, and one oppositional link, if that's OK. This article as it is is crap and needs substantial work still.--Red Deathy 14:41, 27 March 2007 (UTC)

No, we cannot just purge links for no reason. For example just the first one removed: The Socialist Calculation Debate Why? Ultramarine 16:08, 27 March 2007 (UTC)

More generally, this is a well-known problem with many arguments from thinkers of both sides. I suggest that we remove all unsourced material in order to avoid original research. As can be seen in the link above, there is much misrepresentation in this article.Ultramarine 16:24, 27 March 2007 (UTC)

Ultramarine, I didn't just remove opposing views, I removed redundancy, and left in criticism - the bloc quote from trotsky is undue weight, if nothing else, and poor style. I removed most links because they were secondary discussions, leaving either primary sources, one discussion of a notable thinker in the field and a critical site. I reject your implication that I was editing unneutrally, I was trying to make the article more readable, and wish you'd consider each change on a case by case basis.--Red Deathy 16:49, 27 March 2007 (UTC)

Again, I will remove everything unsourced according to policy, there are lots of sources from both sides available, no need for original research. Regarding the links, Wikipedia prefer "secondary sources", if this is even applicable to this subject.Ultramarine 16:52, 27 March 2007 (UTC)
Secondary soruces are for citations, links are better for primary texts. I'll support your changes, but pelase do lose the pointless trotsky quote, it goes on for ever for no good reason...and please do consider some of my heading changes and ordering changes--Red Deathy 16:55, 27 March 2007 (UTC)
This is your own idea, not policy. I disagree, generally it is more useful with an overview than reading through a dozen economic books and papers. The trotsky quote could be place in a footnote and briefly mentioned.Ultramarine 16:57, 27 March 2007 (UTC)
Yes, that is my own idea, we do have some grounds for judgement, such as examples, surely an explanation doesn't need to be sourced - truth claims must be sourced, but we can word how we work out truth claims (I happen to think some sort of worked example is needed to clarify the article).--Red Deathy 17:04, 27 March 2007 (UTC)
Also see WP:EXTERNAL I think the first not-to-link criterion is enough to kibosh many of those linked articles. I'll leave that decision to others, but think it should be done.--Red Deathy 17:15, 27 March 2007 (UTC)
"Any site that does not provide a unique resource beyond what the article would contain if it became a Featured article." Obviously the first link that you have deleted, see above, contains lots of valuable information. Read it.Ultramarine 18:32, 27 March 2007 (UTC)
Urk, I see - I hadn't deleted that link, I made it a reference for the lead, which is a stronger use of such an article. In general I'd prefer if some more of the links were moved to references...--Red Deathy 07:24, 29 March 2007 (UTC)

New layout[edit]

That's excellent - I'm even happier without criticis sections - it gives POV warriors an easy target (and debate sections are even easier). Fantastic, thanks muchly.--Red Deathy 07:14, 2 April 2007 (UTC)

Removing debate[edit]

I've removed the restored debate section because it harmed the new layout we've all worked so hard on, and because it was unsourced and unencyclopaedic. If editors wish to add a section on 'decentralised socialism' they should source it and make it conform to the new layout of the artickle, IMNSHO.--Red Deathy 07:06, 8 May 2007 (UTC)

In removing the section on decentralised socialism you have actually removed THE pivotal and decisive counter-argument to the economic calculation argument reducing it to a debate between free market advocates and central planners. This is pointless and undermines the credibility of this whole entry . Attempts to reinstate the section on decentralised socialism have been edited out. If it the absence of references this can be easily remedied e.g. the article in Common Voice on the ECA, unravelling of a myth —Preceding unsigned comment added by (talk) 23:50, 6 January 2008 (UTC)

Not really, sourced critiqes of the ECA are provided, in the persons of Ollman, Robinson and Ticktin (and the brief mention of Neurath) - centralism v. decentralism is irrelevent to the argument as presented.--Red Deathy (talk) 09:47, 7 January 2008 (UTC)

No it is not irrelevant! If you assume central planning then ipso facto you remove the idea of a self regulating system of stock control which is a key idea in the counterargument to Mises´theory. This is a point that is constantly overlooked by Mises supporters. It is very convenient for them to assume that socialism is a centrally planned economy because they do not then have to contend with the highly damaging criticism emanating from a non-market decentralised socialist perspective —Preceding unsigned comment added by (talk) 17:12, 14 January 2008 (UTC)

Central planning only matters in the Hayekian form of the argument by informational complexity - Mises' position - that relative factors of production and thus production methods cannot be adequately assessed still applies. Regulated stock control could counter that, even if it was part of a centralised planning system, but centralism v. decentralism is neitehr here nor there. If you can find a reputable source on regulated stock control, please do present a para on that point, though I think that really the steady state and abundance arguments already cover most of the ground.--Red Deathy (talk) 08:13, 15 January 2008 (UTC)

I am aware of the hayekian argument against central planning on the grounds of informational complexity but that is not relevant to the point i raised. The point is that central planning precludes the mechanism of self regulating system of stock contrl and, along with that, the law of the minimum which directly addresses - and refutes - Mises' argument against communism on grounds of the economic calculation argument. You can only effectively refute that argument if you assume a communist economy will be an essentially self regulating one and not a centrally planned one. —Preceding unsigned comment added by (talk) 21:36, 26 January 2008 (UTC)

Steady state section[edit]

Hope I'm not rocking the boat adding the new section (which IMNSHO is blanced) but I think it's a useful addition.

BTW, anyone reckon we should try for featured article?--Red Deathy 09:48, 22 June 2007 (UTC)

Market efficiency section[edit]

Red Deathy reverted my edit to the "Markets not efficient" section. I had made two changes. First, the topic sentence was incoherent (due to improper grammar) so I tried to correct it. Second, I added information from someone (i.e. Ludwig von Mises) with a previously unrepresented--though significant--viewpoint.

I believe that the first portion of my edit corrected the poor grammar in the topic sentence. However, the way I rewrote the sentence did not express the "markets aren't efficient" argument well. I fully agree with Red Deathy that "the argument isn't relative."

But I do not understand why the second portion of my edit was reverted. As it is now, the article describes a minority position (i.e. markets aren't efficient) without explicitly giving the other view. According to WP:NPOV#Balance, "When reputable sources contradict one another, the core of the NPOV policy is to let competing approaches exist on the same page." The article cites those who claim socialism cannot be efficient, those who claim socialism can be efficient, and those who claim capitalism cannot be efficient. However, the article never explicitly cites anyone saying that capitalism can be efficient. I tried to correct that. Where did I err? --SirEditALot 03:30, 7 August 2007 (UTC)

BTW, von Mises, and others, responded to the market socialists and mathematical socialists. Should we include summaries of their responses in the article? The article currently states that "In principle, also socialist managers of state enterprises can use a price system, as an accounting system, in order to minimize costs and convey information to other managers." Even if we don't want to add von Mises' counter arguments, this sentence should be reworded because it uses the encyclopedic voice to state that market socialism is works "in principle"--something that is no doubt very controversial. --SirEditALot 03:51, 7 August 2007 (UTC)

In the first instance when I was reviewing the changes your second change didn't show up, so I'd removed it inadvertantly. I considered restoring, but as the Nove quote directly attributes the view to Von Mises that markets can/do optimumly efficiently distribute economic goods, I felt that your inclusion was repetitive, since the fact that Mises felt they could was the object already under discussion. In that sense it already is balanced. As you'll see from above, we've tried to move from the old punch and judy version of the article in which every claim is met with a counter claim. As for the market socialists, et al, the sections on Hayek are already tehre to counter their claims.--Red Deathy 07:11, 7 August 2007 (UTC)
Oh, and on the point about "in principle" I think that was a continuation of a stated opinion, not the encyclopaedic voice, but I thought it best to make a small change to make that clear.--Red Deathy 08:41, 7 August 2007 (UTC)
Oh, finally, if you do want to make the claim that markets are efficient (and some claim that is irrelevent to the economic calculation argument) it would be best to make it either inm the lead or in the explanation of the argument, IMNSHO. Again, we should stay away from punch and judy.--Red Deathy 08:43, 7 August 2007 (UTC)
The reason I did not think the Nove quote sufficient was that he claims von Mises was making an "implicit assumption" regarding the efficiency of markets. Von Mises was making that assumption, but it was anything but implicit. That is, he basically devoted hundreds of pages to explicitly laying out that assumption and trying to prove it to be true. I'm not suggesting we remove the Nove quote for being factually incorrect because the standard for inclusion in Wikipedia is verifiability not truth. However, as per the "Balance" rule that I quoted above, we do need to point out that Nove is contradicted by other reliable sources (e.g. von Mises himself).
I saw the sections about Hayek's responses, but my point was that Hayek was only one of several people who responded. I was trying to ask, should we include information about other responses, or would that end up devoting too much of the article to this single part of the debate?
Your small modification to the Computational complexity section was excellent.
I fully agree about avoiding "punch and judy." I still think the fact that von Mises attempted explicitly to prove markets were efficient should be included for balance, but I'll leave it out for now until I find a good way to include it. --SirEditALot 14:16, 7 August 2007 (UTC)
I think the context is in the economic calculation argument, market efficiency is implicit, maybe that is the change - otehrwise von mises' view generally belong on his own page.--Red Deathy 14:30, 7 August 2007 (UTC)
Von Mises' views do not belong not this page, except as they relate to the economic calculation problem. His views on market efficiency relate to the economic calculation problem because the calculation problem appertains to the efficiency of the various economic systems. Not including his views while simultaneously including the Nove quote violates NPOV specifically by ignoring the "Balance rule." Keeping market efficiency implicit (i.e. never saying anything about it other than to criticize it) seems to me to be the wrong approach. Your thoughts? --SirEditALot 14:49, 7 August 2007 (UTC)
Well, in discussion on Economic calculation in the socialist commonwealth, if Mises did explicitly discuss the efficiency of markets, then nove is incorrect, and we can cite it. We could also mention that elsewhere Mises did make that claim (though its relation to the article would be dubious). As it is, I think the article is balanced because Nove, correctly, attribuites a position to Mises, and criticises it. 'd think balance would be violated if Nove was quoted as saying Mises held the opposite opinion and that was not corrected. Anyway, I think i can add some clarification, see how that goes...--Red Deathy 15:35, 7 August 2007 (UTC)
I think we're getting somewhere. Your modification to the section well clarifies the fact that Nove was specifically referring only to Mises' first paper.
Can you provide justification for the fact that article never says anything about market efficiency other than to criticize it? Why must arguments supporting market efficiency be kept implicit while the arguments of critics are stated explicitly? Such a one sided view seems inappropriate. Perhaps this has been discussed before. If so, I missed it and would appreciate if you would explain why we should keep the article this way.
Finally, in "Economic calculation in the socialist commonwealth," Mises did explicitly claim that under capitalism, efficiency would be achieved. At one point he concludes,
"Now, in the economic system of private ownership of the means of production, the system of computation by value is necessarily employed by each independent member of society. Everybody participates in its emergence in a double way: on the one hand as a consumer and on the other as a producer. As a consumer he establishes a scale of valuation for goods ready for use in consumption. As a producer he puts goods of a higher order into such use as produces the greatest return. In this way all goods of a higher order receive a position in the scale of valuations in accordance with the immediate state of social conditions of production and of social needs.[emphasis added]"
The discussion of market efficiency in "Economic calculation in the socialist commonwealth" is not nearly as detailed as in other works by Mises, but the assumption that markets are efficient is definitely explicitly stated there. --SirEditALot 16:23, 7 August 2007 (UTC)
I'll have to check Nove, but - 1 the article makes clear that's Nove's opinion, and that this is a criticism, it doesn't need rebuttal, we're simply stating what criticisms are out there (for a rebuttal we'd probably need a third source, otherwise citing Mises against nove could constitute OR on our part). I don't, by the way, think the quote above supports your claims to explicitness, and Mises is assuming there, rather than demonstrating/proving.
To sum, then, I think a fair mindede user would read that as saying that Mises reckons markets do operate efficiently, and Nove and Robinson reckon they don't, and will make their own mind up between t'other and which. I think splitting hairs about implicit versus explicit is neitehr here nor there come the balace of the article.
Finally, I reckon we're as far as we'll get together, I recommend dropping user:ultramarine a line, see what they think. I'm afk for a week or so, and will abide by any third party views on the subject.--Red Deathy 16:34, 7 August 2007 (UTC)
Ooh, one otehr option, which I'm not keen on for stylistic reasons, is to cut the Nove reference completely, and leave Robinson standing alone.--Red Deathy 16:36, 7 August 2007 (UTC)
Nove claims that Mises made an implicit assumption. I understand that the article makes it clear that this is merely Nove's claim. Nonetheless, because Nove's claim is contradicted by other reliable sources, it is a violation of NPOV to include Nove's quote without including the other view too. Stating that Nove's quote is merely his oppinion is not enough to bring the article into compliance with the WP:NPOV#Balance rule. You are correct that the quote I posted is not an articulated proof of market efficiency. I tried to state this myself by saying that in "Economic Calculation in the Socialist Commonwealth" Mises was "not nearly as detailed as in other works." My point was that Mises tried to explicitly explain that markets were efficient, which contradicts what Nove said (i.e. Mises' assumption was implicit). If Nove had said that in ""Economic Calculation..." Mises did not extensively articulate his reasons for believing markets to be efficient, he would have been correct. But that is not what he said. He said that Mises' assumption was implicit (i.e. not directly expressed), which is incorrect.
I don't like the idea of cutting out the Nove quote either, since his view is both relevant and based on a reliable source. I'll drop ultramarine a line. We'll see what others think about this. --SirEditALot 17:58, 7 August 2007 (UTC)

Managed to find a web café. Just wanted to add a couple of points. The function of the Nove quote is solely to indicate that some critics believe that Mises' argument assumes/rests on the idea that markets are rational and efficient, the substantive point is Robinson's. To be frank I don't think that implicit/explicit is of much importance on this particular point, though maybe a different secondary source to establish the same bridging effect (i.e. that Mises' argument contains the notion that markets are efficient).--Red Deathy 08:55, 8 August 2007 (UTC)

Maybe we should substitute the Nove quote for this quote by Lange:
"[under capitalism] the rate of saving is affected much more by the distribution of incomes, which is irrational from the economists point of view" [emphasis original] (from "On the Economic Theory of Socialism II" in The Review of Economic Studies)
That would resolve the controversy about the Nove quote. Lange gives more detail than Nove did anyway (he specifically alleges that the problem under capitalism is due to the distribution of income). It still leaves the issue that we're openly citing criticisms of market efficiency while leaving support for market efficiency completely implicit. What do you think? --SirEditALot 15:42, 8 August 2007 (UTC)
That could replace Robinson's quote (which might be good, since she is cited elsewhere in the article) but we'd need a quote saying that teh ECA depends, somehow, on the idea that capitalism is economically rational, to show how quote's such as Lang's are relevent. Good quote mind.--Red Deathy 14:46, 9 August 2007 (UTC)
Robinson makes an altogether different point than Lange does in the quote above. Robinson claims that (all or most) prices under capitalism are monopolistic prices. That is, they benefit the capitalists at the expense of the consumers. However, in the quote above, Lange is not claiming that capitalists have the ability to "administer prices." Lange is claiming that the rate of capital accumulation is not determined rationally under capitalism. In his "On the Economic Theory of Socialism II" paper, Lange does make the following criticisms of capitalism:
  • Under capitalism, Joe Poorman can be starving due to insufficient income to purchase the food he needs while John Richman buys himself a new yacht. Lange says the problem is due to "historical datum" and "a class bias in favour of the rich" which happen to give John Richman greater income (e.g. perhaps the Richman family owns large amounts of land because they were once nobility under feudalism).
  • Entrepreneurs under capitalism do not take into account important externalities
  • Monopolies cause some goods to be priced incorrectly
  • Large monopolistic companies tend to want to maintain the status quo instead of innovating (thus preventing economic progress)
Of all four points, Lange gives the third one the least amount of attention in his "On the Economic Theory of Socialism II" paper (although he does imply that it is a very important point). Robinson's quote, on the other hand, seems to deal exclusively with the monopoly criticism of capitalism. Since Lange and Robinson are mostly talking about different issues, I don't think Lange's quote should replace Robinson's quote.
I'm not sure why you say that the ECA argument somehow depends on capitalism being rational. As I understood it, the ECA was the argument that stated socialism was impossible or impractical due to its alleged inability to calculate opportunity costs--it had little to do with capitalism's efficiency. Mises seems to make this clear by saying (in his 1920 paper), "The knowledge of the fact that rational economic activity is impossible in a socialist commonwealth cannot, of course, be used as an argument either for or against socialism....But he who expects a rational economic system from socialism will be forced to re-examine his views." Mises' argument had to do with whether or not a rational economic system was possible under socialism. Lange's quote and Robinson's quote serve not to refute Mises' point but to to "turn the tables" on him and others who claimed that socialism was bad because it couldn't calculate by claiming that capitalism wasn't a system which resulted in efficiency. So do we really need a quotation by someone claiming that the ECA depends on capitalism's efficiency? Or can we just quote Lange and Robinson and point out that they were trying to claim that calculation under capitalism didn't work right. --SirEditALot 17:14, 9 August 2007 (UTC)

Origin of the Socialist Calculation Debate[edit]

Although Mises is the preeminent figure in the Socialist Calculation Debate, and the publication of Economic Calculation in the Socialist Commonwealth is in many ways a logical starting point for any article on the SCD (aka the Economic Calculation Problem, or ECP hereafter,) a thorough exegis of the events that led to Mises formulating the ECP might be edifying. I suggest elaborating on the connection between general equilibrium analysis and the ECP:

Following the work of neoclassical economists like Alfred Marshall and Leon Walras, economics at the end of the nineteenth century became more formalized and acquired a mathematical rigor that was formerly associated only with the physical sciences. Extrapolating from a model that focused on welfare effects in static equilibrium, a growing number of neoclassical economists after Walras maintained that socialism was both desirable and technically feasible. Walras's work on general equilibrium theory was extended by his student Vilfredo Pareto, who applied his concept of the Pareto Optimum to the socialist economy.

Pareto established to the satisfaction of many economists that it was possible to maximize welfare under socialism in Les Systemes Socialists (1902-1903). Pareto's student Enrico Barrone elaborated on the welfare implications of the Pareto Optimum under socialism in The Ministry of Production in the Collectivist State (1908), concluding that if the socialist ministry of production set prices equal to cost of production and costs of production were minimized, then resources would be allocated optimally and welfare would be maximized. The ministry of production would produce at a perfectly competitive price and quantity and receive revenue equal to the producer surplus that would be achieved by selling at a monopoly price and quantity. Thus, by using general equilibrium analysis and the tools of welfare economics, Barrone was able to reach a consensus among neoclassical economists that rational allocation under socialism was feasible. This conclusion did not go unchallenged.

Austrian economist Ludwig von Mises asserted the logical incoherence of collectivist planning in Economic Calculation in the Socialist Commonwealth (1920). etc., etc....

Prime Director 22:19, 8 September 2007 (UTC)


Shouldn' there be something on Lenin's New Economic Policy (1921)? After all it was the first soviet reaction to a real-life economic calculation problem.. and it goes to the heart of the question of whether calculation is possible in the absence of private property in capital goods.. —Preceding unsigned comment added by (talk) 08:38, 31 August 2010 (UTC)


Is Project Cybersyn relevant to this article? It was a country-wide network implemented by the Allende government to coordinate economic information, so it seems to be an attempt to address this problem. Damburger 06:44, 15 September 2007 (UTC)

I think Cybersyn is definitely relevant James Haughton (talk) 23:55, 12 March 2008 (UTC)

Cybersyn is tangentally relvent, buti's not worth going into great detail (otehrwise we'd have to start including Sovnarkom and other attempts at planning). Reference should be made, but without including material that is best suited to Cybersyn's own page.--Red Deathy (talk) 14:18, 16 April 2008 (UTC)

My reversions[edit]

Just a quick note on the reversion I just made.

  1. The changes to the paragraph about Hayek were changing comments derived from the source cited (I've just checked, and the comments in the reference are closer to the wording in the article).
  2. The stuff contra Lange was uncited entirely, and itself irrelevent, since the thrust of Langs position is that money and pricing is required, i.e. that Socialism would require markets, which is essentially accepting the economic calculation argument as true. Debates on the merits of "market socialism" aren't really relevent here.
  3. Oh, and the additions on Lange read more like a debate - i.e. sounded unencyclopaedic, if Lange is irrelevent he should be excised from the article, or the significant rebuttal should be attributed.--Red Deathy (talk) 09:59, 19 March 2008 (UTC)

A different set of reversions[edit]

Thankyou for being so polite :)

1) On the subject of market socialism, I thought that was the main outcome? Austrian's come up with the idea, socialists wander off, eventually return with market socialism (Poland etc). I thought it warranted far more than a single line. In retrospect, I think the Lange Model deserves at least a mention.

2) While the point of the amount of information has been touched upon, it was never explicitly mentioned. It is definitely not mentioned that in a market economy people can act on information that they do not explicitly realise is important, unlike in a command economy.

3) By most I meant I presumed that most did- Paul Samuelson seemed to think so, and he agreed with the majority of literature I’ve read, along with my instructor (and a Keynesian instructor at that). Should I re-insert specifying him?

4) "However, economics is the science of scarce resources: in a situation of abundance, it is unnecessary." I thought this was basic economic stuff- it's on page one of all the economics textbooks I've read. Alain Anderton, Economics, Fourth edition and Economics, 16th edition, Samuelson, Nordhaus are the two examples that spring to mind.

You also said this repeated the preceding point- I'm sorry, but I can't find where this point was raised prior to my interjection.

5) You're probably right about the noun status of market socialism, proper or otherwise.

Finally, I think the layout could be improved. —Preceding unsigned comment added by Larklight (talkcontribs) 15:14, 7 April 2008 (UTC)

OK, (1) Lange & Market Socialism are mentionjed later on, but they are not the topic of the article, so don't really belong int he lead (IMNSHO). (2) The best way to deal with that is to upgrade the sections on informational complexity, I'd suggest, which avoids that "tit-for-tat" appearance of some previous versions of the article. (3) It's much better to name a critic than most, open to accusations of weasel wording. Better still is to have a verifyiable reference to that effect. (4) Perhaps I'm being a touch heterodox on this matter, Economics is from the greek meaning household management, you'd still have to manage the household even if you had abundance - intriguingly IIRC George Bataille refigured the conception of economics as dealing with the superabundance of wealth that we have - how can we possibly catch/use it all? The preceding sentence, stating that the economic calculation problem disappears with abundnance was basically saying the same thing, which is why I thought it was atautlogous - essentially, socialism becomes "possible" is abundance is "possible"...--Red Deathy (talk) 07:44, 8 April 2008 (UTC)
Larklight those changes are much better (IMNSHO) I've only added the "citation needed" tags because this article has been fully referenced up till now, and it'd be nice if you (or someone else) could add refs on those two points.--Red Deathy (talk) 07:29, 9 April 2008 (UTC)

The Whole Page[edit]

There are a number of serious problems with this whole page. The most glaring omission is the lack of any discussion of entrepreneurship. The role of entrepreneurs was explicit and central to the 1922 book by von Mises. The authors of this page cite the 1920 article by von Mises. One cannot speak authoritatively about the calculation debate without first going through the 1922 book carefully and completely (as I have). The role of entrepreneurs is stressed by modern Austrians as well (Kirzner, Lavoie, Boettke, MacKenzie, Salerno…).

A second major omission is the lack of any discussion of socialist bureaucracy. Part of the 1922 book examines deficiencies that Mises saw with bureaucracies, at least as far as managing commerce is concerned (i.e. Mises was OK with public administration of police and courts, but not “consumer industries”). Mises followed up his 1922 discussion of socialist bureaucracy with a 1944 book entitled “Bureaucracy”. The lack of any discussion of this component of the von Mises argument leaves a massive hole in this entry.

The next major problem is its wholly inadequate discussion of the Lange-Taylor model. The Lange-Taylor trial and error proposal for market socialism definitely does not try to incorporate markets into socialism. The Lange-Taylor proposal aims at simulating markets though trial and error. Trial and error aims at generating the results of markets without actually having markets. Red Deathy is wrong in his assertion that Lange thought “that Socialism would require markets”. Lange thought that socialism allowed for the simulation of some markets. Seeing as I wrote my dissertation on Lange, read and reread everything of his, and have published my work, I think there is some chance that I might know more about Lange than anyone who is posting here (unless Jan Toporowski is posting here). Furthermore, the work of Lerner, Dickinson, Durbin, and Dobb gets no play in this entry.

Next, the remarks from Joan Robinson apply to this debate, but are not a part of this debate. Robinson was into the Cambridge Capital Controversy, not the Calculation Debate. To discuss JR, while only mentioning Lange and ignoring Lerner and the others is absurd. The next major omission concerns recent modifications of market socialism by Roemer, Bardhan, Shweikart, Burczak, and Junker. These are the five leading scholars on this side of the issue in recent years. Leaving them out renders this entry absurd. Joe Stiglitz gets no mention either, and he did write a book (albeit a lousy one) on this subject.

Yet another omission concerns the specific role of financial markets in the calculation issue. Austrians, like Lachmann, MacKenzie, and Schumpeter have made the importance of financial markets to the calculation issue clear. This article does not mention any of this literature. Finally, as far as the parts of the calc debate that are mentioned is concerned, the reading on Hayek and Mises in this entry is so thin that it can’t be taken seriously. Yes, Mises wrote something about hectoliters and such, but this does not really explain the calculation problem. Furthermore, the references to how the problem can be solved in a non-growth economy or with optimization equations indicates that the authors of this page need to read a few thousand pages on this subject. The economic calculation problem does not exist under static conditions implied by non growth or by a set of simultaneous equations. There is no calculation problem to solve in these conditions.

The general problem with this article is that its authors/editors have only a superficial understanding of a tiny fragment of the calculation problem. Some of you might think that you are learned experts on this issue, but this is not even close to being true. ES —Preceding unsigned comment added by (talk) 00:33, 11 April 2008 (UTC)

Well, there's a lot to deal with there, you certainly seem able to bring a lot to this article, and I hope you can come up with some positive proposals for additions. On bureaucracy, isn't that covered in the discussion of hayeks computational complexity? I accept I was wrong about Lange, I only cited him to have something to comply with WP:V for mentioning market socialism (which it would be undue weight to go into too heavilly on this page). Likewise with Joan Robinson, who was simply a representative author who could be quoted. I should add, I agree, I'm not an expert, I'm a layman who has simply read some of the accessible and popular debates that surround this topic. The stuff about statics and abundance is included because some argue that those conditions make socialism possible (refuting some of the stronger claims for the problem). Please bear in mind, though, this is a general encyclopaedia artice, that should not run to thousands of pages, it should include only the broad outlines, and sufficient references for interested readers to follow up.--Red Deathy (talk) 07:26, 11 April 2008 (UTC)

Yes, I agree, broad outlines and sufficient references. The computational complexity issue does not cover the bureaucracy issue, as discussed by Mises, Lange, and Dickinson. This entry should include brief explanations of the bureacracy, social dividends, trial and error, and financial market issues. Perhaps I could write up a few things when I have some free time. ES

Wish I could help. Would like to, but have never read anything specifically on it. Still, clearly there is a lot of work to do. Larklight (talk) 21:07, 13 April 2008 (UTC)
ES, thanks, if you can't find the time, could you post some suggested basic reading that us monkeys could use to improve the page in the directions you suggest? :) --Red Deathy (talk) 07:28, 14 April 2008 (UTC)
Hmm. I've read the road to serfdom (a fair while ago) and own Constitution of liberty, although I haven't read all off the latter, and doubt it'll be much help. Nevertheless I think the former should be quite useful, if we have nothing better. Ooo. What about ? Maybe we should have a crack at this... This last one looks pritty good, and I think we can count on it not to underestimate Mises's point. Larklight (talk) 16:05, 16 April 2008 (UTC)

I added in the five basic conditions for the performance of economic calculation in captialism- accroding to Mises and Hayek. I did not add anything as to why socialism lacks the necessary means to match economic calculation in capitalism, not yet. The section I added is long, compared to what is here already. But I am not sure how to condense things further. This is a condensation of thousands of pages of detail (albeit much of this detail was unecessary). I need to add to the bibio too, I refernence things that are likely not there. Too late for more tonight...

As for basic reading, Mises' book Bureaucracy (1944) is pretty darn good- short and detailed. Bureaucracy is a much easier read than Humen Action or Socialism. The Road to Serfdom and The Constitution of Liberty are of no use on this subject. Stay away from The Fatal Conceit too. Hayek did not really write the Fatal Conceit, he merely wrote some notes that were "edited" into a book. Also, the bit about Hayek admitting that socialism could work in theory is dead wrong. Hayek admitted only that socialism could work as a thought experiment, in terms of General Equilibrium theory. Mises made the same exact concession in 1922. Joe Salerno is simply wrong about Hayek on this issue, and I doubt that he will defend this position much longer. ES

I added in a short bit about why Mises thought socialist calculation impossible, and a biblio. I also took the liberty of deleting the stuff about how "Hayek was more moderate" by admitting that socialism could work in theory, but faced practical problems. This is a myth propagated by Joe Salerno and other Rothbardians. If any of you want to bring back the proposition that Hayek backed off from Mises' impossibility claim, I would suggest finding evidence of this in what Hayek actuallty wrote. —Preceding unsigned comment added by (talk) 13:40, 30 April 2008 (UTC)

I bow to your supereor knowledge. Don't worry about it being too long, it looks a lot more aproachable with sub-headings. Just feed us more stuff on the Socialism side! Larklight (talk) 17:33, 25 May 2008 (UTC)
Thanks for all that, Anon, I think some of that will require copy editting - reads a bit essayish and needs a bit of NPOVing to Wikipedia standards (i.e. changignt hings to say "Hayek claims", etc.), it'll take a while, as will sprucing the refs. plenty of work for the rest of us.--Red Deathy (talk) 08:26, 27 May 2008 (UTC)


He argues that, due to the pressure from free trade of potential competition, monopolies still have to behave in a competitive manner, and cannot charge higher prices.[1]

I took that out because Robinson's point isn't that monopolies set excessive prices, but that they do not set market prices in the conventional sense - yes, they have to set competitive prices (because there is a competitive market in capital) but their prices are not derived, according to Robinson, from tradtional supply/demand models but more resemble the administered prices seen in Soviet state capitalism. If true, this breaks the link between markets and rational allocation (it would also, I'd have thought, have words to say about computational complexity).

Just to return, also to the tit for tat thing, balance should emerge across the page, I just think a rebuttal after each para looks bad, to assert in the formulation of the ECP that it is generally held that markets are allocatively efficient would balance Nove's and Robinson's criticisms. I'll leave it there for now, but ask that a better place be found for Samuelson..--Red Deathy (talk) 07:08, 17 April 2008 (UTC)

If that was what it sounded like Friedman was saying, I worded it badly. What he meant was they do have to set them in the conventional way: becuase other potential and foreign compeditors keep them from restricting supply. It's bnothing (directly) to do with capital markets
On the subject of tit for tat, it isn't relivant to the problem how Free market's work. The point of the issue is to show that socialism is impossible (or inefficient for Hayek). If markets were inefficient, Mises could just say 'at least they are possible- rational if not efficient.' This [age isn't about defending markets, it's about an attack on socialism - defense of markets is only necessary when Nove and Robinson respond. Larklight (talk) 21:15, 19 April 2008 (UTC)
I just realised you may be right but for the opposite reason- Robinson's point is about capital markets, wheres as Milton isn't talking about them. In this regards it isn't a response- but it still covers the more important section, that monolpolies=bad Larklight (talk) 16:59, 20 April 2008 (UTC)
Well, I don't think Robinson is saying monopolies=bad, and certainly not in the quoted passage - simply that monopolies exist and undermine the (then) claims of the free marketeers. You're right this page isn't about defending markets, but at least one strand of the critique of the ECP has been to challenge how efficient/rational markets are, ISTR a large section of Ramsay-Steele's book is a rebuttal of that point (he makes IIRC, much the same point you do). BTW, i hope my small copy edits are acceptible, I was just adhjusting for style/tone...--Red Deathy (talk) 07:10, 21 April 2008 (UTC)
Looks fine :) Larklight (talk) 19:29, 22 April 2008 (UTC)

External links[edit]

OK, I restored (possibly temporarily) the recently deleted external links. My main rational being that this is despite its mainstream acceptance, a pretty fringe subject (i.e. a great many people take the acceptance of the argument as read, and so tend not to discuss/dispute it), so linking to some grey pages is appropriate, particularly to get the flavour of the controversy aspet. Authors link Cox and the LA are appropriate, even if not neutral academic sources.--Red Deathy (talk) 08:20, 10 November 2008 (UTC)


This section should really be used to only detail the counter-arguments provided to the Economic calculation problem. It's confusing and inefficient to mix arguments in a tit-for-tat manner. Please remove the statements in the section that reflect pro-ECP arguments. They don't belong there. Or, at least clean it up so that a reasonable person could come by the article, read it, and not be confused as to where the camps stand. You can't just use the wikipedia page to argue. That's not what it's there for. —Preceding unsigned comment added by (talk) 23:11, 27 January 2009 (UTC)

I agree, and a determined effort was made a year or so ago to get rid of the tit-for-tat arguing. I tried to maintain that approach, but couldn't sustain a consensus (Some editors couldn't let a point go without entering its supposed refutation). I've renamed the section criticism, which may help a little, since criticism entails a touch of debate. I've tried and failed, so if you want to be bold and make changes, I'll help.--Red Deathy (talk) 08:56, 28 January 2009 (UTC)

"On the other hand"-ism[edit]

"Efficiency of Markets" contains more counter-criticism (apologetics) than criticism. A victim of "on the other hand"-ism. —Preceding unsigned comment added by (talk) 08:00, 1 June 2009 (UTC)

Title Disambiguation, or article edit[edit]

I jumped from a section in the Marxism article to a link titled "Economic Calculation Debate" which apparently took place in the 1920's. However, i was redirected to this article "Economic Calculation Problem", while they are probably extremely related articles, it seems the redirect should be moved, and a new article should be created, or perhaps a new section within this one to describe the physical debate, if there was one. Not being an expert, it would seem its either inconsistent, or poorly explained. All I found was a mention that Mises proposed the problem in 1920's. I don't see any information about a debate (as a debate needs two people), just that Mises proposed the problem. I would propose a new article, and title it "The Socialist Calculation Debate", and possibly outline the arguments made at that time. Thekappen (talk) 04:28, 29 November 2009 (UTC)

shouldn't this be split?[edit]

Into two articles, one on the "Economic calculation problem" (the efficient allocation of goods in a society) and one on the actual "Socialist Calculation Debate" (a bunch of people writing papers and arguing with each other)?radek (talk) 00:27, 23 June 2010 (UTC)

New School History of Economic Thought RS[edit]

Whoops, I meant to put this discussion at the WikiProject Economics page. CRETOG8(t/c) 18:18, 1 October 2010 (UTC)

Max Weber's priority[edit]

The argument that an efficient command economy under socialism is impossible because there would be no way to reliably price capital goods was not invented by Mises, as this article currently claims. You can find the argument made very clearly in Max Weber's Economy and Society (Part One, Ch. II, Sec. 12; the current Wikipedia biography of Weber provides a quote). That book wasn't published until 1922, but it was based on lectures that Weber gave in 1909-14. Weber himself died in 1920, the same year that Mises published his paper on the economic calculation problem. It's remarkable that Mises's paper doesn't cite Weber, since Mises was very well aware of Weber's work and we know from this interview with Gottfried Haberler that Weber was one of the main topics of discussion during Mises's private seminars in Vienna, in the years immediately after World War I. - Eb.hoop (talk) 19:32, 13 February 2011 (UTC)

Mechanism design[edit]

Maskin's (2008) Nobel lecture, AER volume 98 (3) describes the debates between Lange/Lerner and Hayek/von Mises as the inspiration for mechanism design theory, starting with the work of Leonid Hurwicz. It seems this page could be improved by bringing in a more modern point of view that reflects how mechanism design has shed light on the economic calculation problem. Rinconsoleao (talk) 12:21, 4 January 2012 (UTC)

Name change[edit]

Shouldn't this really be under Socialist calculation debate (now a redirect, though the article lede pretty much admits that that is how it's known in the sources) since that's how this is known in the literature? A more general problem is that this is written from a very Austrian POV (Mises and Hayek refuted Lerner and Lange and all that) rather than presenting a balanced overview. As it happens I actually do think that Hayek and Mises did do a good job of refuting the "market socialism" argument, but this article is so skewed towards their view it's a bit embarrassing. In terms of a general clean up of that NPOV issue, I don't even know where to start.Volunteer Marek

Or to put it another way, the Socialist calculation debate was a debate between two sides. This article is named after - and focuses on - the arguments put forth by one of the sides. That's not balanced.Volunteer Marek 02:42, 21 January 2013 (UTC)

Those are really good points, I think. But moving the article is likely to be easier than rebalancing the content... bobrayner (talk) 15:40, 23 January 2013 (UTC)
If I have some time I'll try to rewrite at least the lede over the weekend.Volunteer Marek 23:30, 23 January 2013 (UTC)
I think it would be easier to split the article into two, one being called "Socialist calculation debate" which can cover the historical debate between neoclassical economists and the Austrian school critics of socialist planning as well as modern contributions to the debate by Cockshott et al. The current article titled "Economic calculation problem" should focus more on the specific critique of central planning by Mises et al.-Battlecry 09:09, 29 January 2013 (UTC)
That could work.Volunteer Marek 06:36, 31 January 2013 (UTC)

Soviet examples of economic calculation[edit]

I would like added in this article examples of how the Soviet Union had economic calculation.

What actually happens is that “world prices,” i.e., capitalist world prices, are used in all intra-[Soviet] bloc trade. They are translated into rubles . . . and entered into bilateral clearing accounts. To the question, “What would you do if there were no capitalist world?” came only the answer “We’ll cross that bridge when we come to it.” In the case of electricity the bridge is already under their feet; there has been great difficulty in pricing it since there is no world market. (Wiles, “Changing Economic Thought in Poland,” pp. 202–03)

chapter 12 Footnote 72 of "Man Economy and state" by Murray Rothbard

I think this is extremely important. The Austrian view, of course, is that the Nazis and Soviets were as successful as they were because they could copy prices from the capitalistic world.

Also there should be some and references to the article "Socialism: Still Impossible After All These Years" which talks about the Soviets themselves admitting the problem of economic calculation and the problems they had in creating a moneyless society also from the article "Economic Calculation in the Socialist Commonwealth" where Mises talks about how Lenin wanted to spread statistics to the masses because of the problem of economic calculation. The article has a section on theory and criticisms but should have a whole section on concrete examples.

From "Economic calculation in the socialist commonwealth" page 31 he is quoting Lenin. Mises says that Lenin gives a most unsatisfactory answer to how economic calculation is to be carried on. This is an important quote to add to a new section because it reveals the Soviet need for economic calculation

bring statistics to the masses, make it popular, so that the active population will gradually learn by themselves to understand and realize how much and what kind of work must be done, how much and what kind of recreation should be taken, so that the comparison of the economy’s industrial results in the case of individual communes becomes the object of general interest and education.29

Also from "Socialism: Still Impossible After All These Years" by Peter J. Boettke and Peter T. Leeson

Quoted from page 17:

Why this tremendous failure? If we are to take the quotations from Lenin, Bukharin and others from above seriously, the issue of calculation, not incentives, stood at the center of socialism’s ability to perform. Thus as the historian of War Communism, Lancelot Lawton pointed out, War Communism’s failure stemmed from its “disregard of economic calculation” (1932 I, 107). The “attempts of the Bolsheviks to establish moneyless accounting ended with no accounting at all.” Thus in striving “to make all men wealthy, the Soviet state had made it impossible for any man to be otherwise than poor” (1932 I, 111). This reason for War Communism’s failure was reiterated by the Russian economist Boris Brutzkus as well. Writing near the end of the War Communist period in 1920, he put it this way: the attempt to substitute a central plan for the spontaneous process of market evaluation led to the “atrophy of economic calculation” in the Soviet Union. The failure of War Communism resulted from the fact that it “no longer possesses the sensitive barometer provided by the market prices” (1982, 37). And in the aftermath of the failure of War Communism, Nikolai Bukharin himself stated that Mises was “one of the most learned critics of communism” and that the economic catastrophe that was evident in 1921 did resemble the picture “predicted” by Mises. (1925, 188)15 — Preceding unsigned comment added by Gravyten577 (talkcontribs) 02:36, 14 April 2013 (UTC)

— Preceding unsigned comment added by Gravyten577 (talkcontribs) 02:14, 14 April 2013 (UTC)

Rothbard would hardly be the one to discuss this topic. Start by studying the work of Nobel laureate Leonid Kantorovich and others actually responsible for managing the Soviet economy.

SPECIFICO talk 02:33, 14 April 2013 (UTC)

K thanks I will look into it. Would you say that it is false that the Soviets relied on the capitalistic countries for prices. Rothbard gave a quote from someone supposedly viewing what was really going on and when this person asked what would they do if there was no capitalistic world the response was “We’ll cross that bridge when we come to it.”

Of course this could be pro capitalistic propaganda.

In the book "Human Action" on his chapter on the impossibility of economic calculation under socialism section 2 Mises claims that if it weren't for the ability to refer to foreign prices the Nazi and Soviet regimes would become "planless". Even if one disputes the truthfulness of this statement this is what the Austrian economists believe so should be added in a section in this wiki article.

An apparent verification of these errors was seen in the experience of the socialist governments of Soviet Russia and Nazi Germany. People do not realize that these were not isolated socialist systems. They were operation in an environment in which the price system still worked. They could resort to economic calculation on the ground of the prices established abroad. Without the aid of these prices their actions would have been aimless and planless. Only because they were [p. 703] able to refer to these foreign prices were they able to calculate, to keep books, and to prepare their much talked about plans. — Preceding unsigned comment added by Gravyten577 (talkcontribs) 03:03, 14 April 2013 (UTC)

— Preceding unsigned comment added by Gravyten577 (talkcontribs) 02:43, 14 April 2013 (UTC)

The Rothbard discussion of electricity pricing is funny. Capitalist economies don't know how to price electricity either. Rothbard might just have said it's because we're not purely capitalist. Leave it up to whoever produces electricity and then by definition the problem is solved and there's no calculation problem. The topic of the article seems ambiguous. Is it the actual problem or the debate as framed by anti-socialists? SPECIFICO talk 03:02, 14 April 2013 (UTC)

Your right the problem isn't about the debate but the actual problem. Nikolai Bukharin was a Soviet economist and apparently agreed with Mises about the problems of economic calculation

Turing machines?[edit]

If I understood correctly, the article states that if a Turing Machine can simulate any other Turnig Machines, central planing should be in no disadvantge to a descentralized one. I see many problems with this:
- It assumes humans are turing machines, which is highly debatable to say the least. We're yet to see a Turing Machine having or expressing desires, for instance, an important factor in economics.
- It assumes central planners will have the same amount of information than the group of descentralized consumers - it's akin to say that it's completely possible to know beforehand if a new prodcut would be sucessful. Actually, it's much more bold than that since we're not talking about a single product, but the whole economic production.
- It blatanly ignores that while one Turing Machine can, indeed, simulate all others Turing Machines, it will take time in doing so. By the time the central planners finished evaluating every person from its population, even if we assume they have an intimate knowledge of every citizen wishes and needs, these wished and needs, along other external economic variables (technology available, climate, foreing trade opportunities, etc) will have changed too, rendering the previous analysis outdated.
I could write more, but I believe this is sufficient to show that, while it seems cool to use a Turing Machine analogy, it simply doesn't hold. — Preceding unsigned comment added by (talk) 03:26, 27 July 2014 (UTC)'s "mises-on-rational-economic-planning."[edit]

This blog has reviews of Mises and says that his theories don't apply to a mutualist or Ricardian type economy of workers owned companies in a market economy because there are still price singles involved. It seems relevant — Preceding unsigned comment added by Ultan42 (talkcontribs) 21:06, 31 July 2014 (UTC)

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  1. ^ Free to Choose, Milton Friedman, 1979, Secker and Warburg