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Thursday, December 6, 2012


Although to some extent Max Weber and Professor Brutzkus share the credit of having pointed out independently the central problem of the economics of socialism, it was the more complete and systematic exposition of Professor Mises, particularly in his larger work on Die Gemeinwirtschaft, which has mainly influenced the trend of further discussion on the Continent. In the years immediately succeeding its publication a number of attempts were made to meet his challenge directly and to show that he was wrong in his main thesis, and that even in a strictly centrally directed economic system values could be exactly determined without any serious difficulties. But although the discussion on this point dragged on for several years, in the course of which Mises twice replied to his critics, it became more and more clear that in so far as a strictly centrally directed planned system of the type originally proposed by most socialists was concerned, his central thesis could not be refuted. Much of the objections made at first were really more a quibbling about words caused by the fact that Mises had occasionally used the somewhat loose statement that socialism was impossible, while what he meant was that socialism made rational calculation impossible. Of course any proposed course of action, if the proposal has any meaning at all, is possible in the strict sense of the word, i.e. it may be tried. The question can only be whether it will lead to the expected results, that is whether the proposed course of action is consistent with the aims which it is intended to serve. And in so far as it had been hoped to achieve by means of central direction of all economic activity at one and the same time a distribution of income independent of private property in the means of production and a volume of output which was at least approximately the same or even greater than that procured under free competition, it was more and more generally admitted that this was not a practicable way to achieve these ends.
But it was only natural that even where Professor Mises’ main thesis was conceded this did not mean an abandonment of the search for a way to realize the socialist ideals. Its main effect was to divert attention from what had so far been universally considered as the most practicable forms of socialist organization to the exploration of alternative schemes. It is possible to distinguish two main types of reaction among those who conceded his central argument. In the first place there were those who thought that the loss of efficiency, the decline in general wealth which will be the effect of the absence of a means of rational calculation, would not be too high a price for the realization of a more just distribution of this wealth. Of course if this attitude is based on a clear realization of what this choice implies there is no more to be said about it, except that it seems doubtful whether those who maintain it would find many who will agree with their idea. The real difficulty here is, of course, that for most people the decision on this point will depend on the extent to which the impossibility of rational calculation would lead to a reduction of output in a centrally directed economy compared with that of a competitive system. And although in the opinion of the present writer it seems that careful study can leave no doubt about the enormous magnitude of that difference, it must be admitted that there is no simple way to prove how great that difference would be. The answer here cannot be derived from general considerations but will have to be based on a careful comparative study of the working of the two alternative systems, and presupposes a much greater knowledge of the problems involved than can possibly be acquired in any other way but by a systematic study of economics.1
The second type of reaction to Professor Mises’ criticism was to regard it as valid only as regards the particular form of socialism against which it was mainly directed, and to try to construct other schemes that would be immune against that criticism. A very considerable and probably the more interesting part of the later discussions on the Continent tended to move in that direction. There are two main tendencies of speculation. On the one hand it was attempted to overcome the difficulties in question by extending the element of planning even further than had been contemplated before, so as to abolish completely the free choice of the consumer and the free choice of occupation. Or on the other hand it was attempted to introduce various elements of competition. To what extent these proposals really overcome any of the difficulties and to what extent they are practical will be considered in later sections of this volume. In so far as the result of the German discussions are concerned, Professor G. Halm, who has taken a very active part in these debates, summarizes in his contribution to the present volume, the present state of opinion among those who take a critical attitude to the present. A list of all the more important contributions made in this debate from both sides will be found in the appendix.

Collectivist Economic Planning

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