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Wednesday, December 5, 2012


The distinction of having first formulated the central problem of socialist economics in such a form as to make it impossible that it should ever again disappear from the discussion belongs to the Austrian economist Professor Ludwig von Mises. In an article on Economic Calculation in a Socialist Community, which appeared in the spring of 1920,1 he demonstrated that the possibility of rational calculation in our present economic system was based on the fact that prices expressed in money provided the essential condition which made such reckoning possible. The essential point where Professor Mises went far beyond anything done by his predecessors was the detailed demonstration that an economic use of the available resources was only possible if this pricing was applied not only to the final product but also to all the intermediate products and factors of production, and that no other process was conceivable which would take in the same way account of all the relevant facts as did the pricing process of the competitive market. A translation of this article is contained in the present volume and it is hoped that the larger work in which it was later incorporated will also soon be available in an English edition. Together the two works represent the starting-point from which all the discussions of the economic problems of socialism, whether constructive or critical, which aspire to be taken seriously must necessarily proceed. As the main argument is contained in the article reproduced later in this volume, nothing further need to be said about it at this point.
While Professor Mises’ writings contain beyond doubt the most complete and successful exposition of what from then onwards became the central problem, and while they had by far the greatest influence on all further discussions, it is an interesting coincidence that about the same time two other distinguished authors arrived independently at very similar conclusions. The first was the great German sociologist Max Weber, who in his posthumous magnum opus, Wirtschaft und Gesellschaft, which appeared in 1921, dealt expressly with the conditions which in a complex economic system made rational decisions possible. Like Professor Mises (whose article he quotes as having come to his notice only when his own discussion was already set up in print), he insisted that the in natura calculations proposed by the leading advocates of a planned economy could not provide a rational solution of the problems which the authorities in such a system would have to solve. He emphasized in particular that the rational use and the preservation of capital could be secured only in a system based on exchange and the use of money, and that the wastes due to the impossibility of rational calculation in a completely socialized system might be serious enough to make it impossible to maintain alive the present populations of the more densely inhabited countries.
The assumption that some system of accounting would in time be found or invented if one only tried seriously to tackle the problem of a moneyless economy does not help here : the problem is the fundamental problem of any complete socialization and it is certainly impossible to talk of a rationally “planned economy” while in so far as the all-decisive point is concerned no means for the construction of a “plan” is known.1
A practically simultaneous development of the same ideas is to be found in Russia. Here in the summer of 1920 in the short interval after the first military successes of the new system, when it had for once become possible to utter criticisms in public, Professor Boris Brutzkus, a distinguished economist mainly known for his studies in the agricultural problems of Russia, subjected to a searching criticism in a series of lectures the doctrines governing the action of the communist rulers. These lectures, which appeared under the title “ The Problems of Social Economy under Socialism ” in a Russian journal and were only many years later made accessible to a wider public in a German translation,1 show in their main conclusion a remarkable resemblance to the doctrines of Mises and Max Weber, although they arose out of the study of the concrete problems which Russia had to face at that time, and although they were written at a time when their author, cut off from all communication with the outside world, could not have known of the similar efforts of the Austrian and German scholars. Like Professor Mises and Max Weber his criticism centres round the impossibility of a rational calculation in a centrally directed economy from which prices are necessarily absent. An English translation of this essay, together with discussion of the development of economic planning in Russia which conforms in a remarkable way to the expectations which could be based on such theories, will appear simultaneously with the present book as a companion volume to it.

Collectivist Economic Planning

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