The Comedy of Mises

1. Without private property in the means of production, there will be no market for the means of production;
2. Without a market for the means of production, there will be no monetary prices established for the means of production;
3. Without monetary prices, reflecting the relative scarcity of capital goods,
economic decision makers will be unable to rationally calculate the alternative use of capital goods.

It will be evident, even in the socialist society, that 1,000 hectolitres of wine are better than 800, and it is not difficult to decide whether it desires 1,000 hectolitres of wine rather than 500 of oil. There is no need for any system of calculation to establish this fact: the deciding element is the will of the economic subjects involved.

— Mises, Economic Calculation in the Socialist Commonwealth

Only under simple conditions can economics dispense with monetary calculation. Within the narrow confines of household economy, for instance, where the father can supervise the entire economic management, it is possible to determine the significance of changes in the processes of production, without such aids to the mind and yet with more or less of accuracy. In such a case the process develops under a relatively limited use of capital. Few of the capitalistic roundabout processes of production are here introduced: what is manufactured is, as a rule, consumption goods or at least such goods of a higher order as stand very near to consumption-goods…In the narrow confines of a closed household economy, it is possible throughout to review the process of production from beginning to end, and to judge all the time whether one or another mode of procedure yields more consumable goods.

— Mises, Economic Calculation in the Socialist Commonwealth

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.

— Mises, Economic Calculation in the Socialist Commonwealth

Every good will go through a whole series of stages before it is ready for use. In the ceaseless toil and moil of this process, however, the administration will be without any means of testing their bearings. It will never be able to determine whether a given good has not been kept for a superfluous length of time in the necessary processes of production, or whether work and material have not been wasted in its completion. How will it be able to decide whether this or that method of production is the more profitable?

— Mises, Economic Calculation in the Socialist Commonwealth

It is an illusion to imagine that in a socialist state calculation in natura can take the place of monetary calculation. Calculation in natura, in an economy without exchange, can embrace consumption goods only; it completely fails when it comes to dealing with goods of a higher order. And as soon as one gives up the conception of a freely established monetary price for goods of a higher order, rational production becomes completely impossible. Every step that takes us away from private ownership of the means of production and from the use of money also takes us away from rational economics.

— Mises, Economic Calculation in the Socialist Commonwealth

[O]nce this decision has been taken [on what to produce based on the information gathered of consumer demand], the real task of rational economic direction only commences, i.e., economically, to place the means at the service of the end. That can only be done with some kind of economic calculation. The human mind cannot orientate itself properly among the bewildering mass of intermediate products and potentialities of production without such aid. It would simply stand perplexed before the problems of management and location.

— Mises, Economic Calculation in the Socialist Commonwealth

Mises’s pathbreaking and central insight is that monetary calculation is the indispensable mental tool for choosing the optimum among the vast array of intricately-related production plans that are available for employing the factors of production within the framework of the social division of labor. Without recourse to calculating and comparing the benefits and costs of production using the structure of monetary prices determined at each moment on the market, the human mind is only capable of surveying, evaluating, and directing production processes whose scope is drastically restricted to the compass of the primitive household economy.

…a single human mind — even if it were miraculously endowed with complete and accurate knowledge of the quantities and qualities of the available factors of production, of the latest techniques for combining and transforming these factors into consumer goods, and of the set of all individuals’ value rankings of consumer goods — would be utterly incapable of determining the optimal pattern of resource allocation or even if a particular plan was ludicrously and destructively uneconomic

— Salerno, Economic Calculation in the Socialist Commonwealth

[T]he mind of one man alone — be it ever so cunning, is too weak to grasp the importance of any single one among the countlessly many goods of a higher order. No single man can ever master all the possibilities of production, innumerable as they are, as to be in a position to make straightway evident judgments of value without the aid of some system of computation.

— Mises, Economic Calculation in the Socialist Commonwealth

Consequently, our enterprises cannot, and must not, function without taking the law of value into account. Is this a good thing? It is not a bad thing. Under present conditions, it really is not a bad thing, since it trains our business executives to conduct production on rational lines and disciplines them. It is not a bad thing because it teaches our executives to count production magnitudes, to count them accurately, and also to calculate the real things in production precisely, and not to talk nonsense about “approximate figures,” spun out of thin air.

— Joseph Stalin, Economic Problems of Socialism in the USSR

[T]he existence of the Soviet Union and other centrally-controlled economies is no refutation of his thesis regarding the impossibility of socialist economy. Their gross inefficiency notwithstanding, these economies in fact do eke out a precarious existence as parasites on the social appraisement process and integrated capital struc-ture produced by the surrounding world market.

— Salerno, Economic Calculation in the Socialist Commonwealth

[T]he extent to which socialism is in evidence among us constitutes only a socialistic oasis in a society with monetary exchange, which is still a free society to a certain degree. In one sense we may agree with the socialists’ assertion which is otherwise entirely untenable and advanced only as a demagogic point, to the effect that the nationalization and municipalization of enterprise is not really socialism, since these concerns in their business organizations are so much dependent upon the environing economic system with its free commerce that they cannot be said to partake today of the really essential nature of a socialist economy. In stat

— Mises, Economic Calculation in the Socialist Commonwealth

THE ‘WASHINGTON CONSENSUS’, which for nearly a decade put the best face it could on Russia’s mis-transition, is showing signs of crumbling. It is now acknowledged that the Russian Federation’s post-communist depression was deep and painful, causing immense physical hardship and psychological stress. After reporting unemployment in the low single digits during the first half of the 1990s, it turns out that more than 17 million are seeking work or have left the labour force after years of discouragement…the physical hardships, social disruption and psychological distress associated with a 44% decline in Russia’s GNP caused millions of premature deaths, in addition to any adverse impact they may have had on fertility. The exercise reveals that there were 3.4 million Russian premature deaths in 1990–98 plausibly attributable to the travails of post-communism.

— “Premature Deaths: Russia’s Radical Economic Transition in Soviet Perspective”, Europe-Asia Studies

Russia under Boris Yeltsin was economically depressed, militarily enfeebled, and dependent on Western assistance…Virtually all these assets were under government control until privatization of the mid 1990’s…There is wide consensus that the arrests of Yukos major shareholder, Platon Lebedev for fraud in July 2003 and the oil giant’s CEO, Mikhail Khodorkovsky for tax evasion in October 2003 were seminal events in Putin’s first term as President, marking the beginning of the process of re-nationalizing strategic industries by the Kremlin.

— “A HISTORY OF PRESIDENT PUTIN’S CAMPAIGN TO RE-NATIONALIZE INDUSTRY AND THE IMPLICATIONS FOR RUSSIAN REFORM AND FOREIGN POLICY”, Colonel Richard J. Anderson United States Army

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