Work detail

Is Economic Calculation Possible Under Socialism? The Calculation Debate After Sixty Years

Author: Bc. Petra Orogványiová
Year: 2005 - summer
Leaders: doc. PhDr. Martin Gregor Ph.D.
Consultants:
Work type: Bachelors
Language: Slovak
Pages: 70
Awards and prizes: B.A. with distinction from the Dean of the Faculty of Social Sciences for an extraordinarily good bachelors diploma thesis
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Abstract: Since 1920s, a discussion concerning the possibility – or impossibility – of economic calculation under socialism was taking place among academic economists. In 1920 Ludwig von Mises pointed out the problem of calculation. In his article entitled Economic Calculation in Socialist Commonwealth he cogently proved that socialism cannot work properly, because it dismantles the market. Hence, it hampers the emergence of market prices without which economic calculation is not possible. This argument was developed two years later in his work Socialism. In years to come, a heated discussion about the impossibility of economic calculation under socialism took place.
This work attempts to examine arguments of both the proponents and the opponents of socialist economic order. We focus mainly on contribution made by Ludwig von Mises and Friedrich A. von Hayek. We show the practical equivalence of Mises’ and Boris Brutzkus’ contributions.
The core of Mises‘ argument was the emphasis on the impossibility of adding and comparing heterogeneous quantities on the one hand, and the emphasis on the role of entrepreneur in appraising capital goods on the other hand. We see Hayek’s contribution basically in having pointed out that the knowledge needed for central planning of economic activities is necessarily dispersed and decentralised. We discuss the objections raised by economists working in the neoclassical tradition, particularly the proposal by Oskar Lange, according to which the optimal quantity of output can be attained by simulating some of the characteristics of market economy. Finally we argue that validity of Mises‘ and Hayek’s arguments cannot be denied even from today’s perspective and that they represent a crucial contribution of the Austrian School to economic thought.
Downloadable: Petra Orogvanyiová

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