- 11 Jan 2013 16:40
#14145860
Economic calculations are the rational steps taken to decide how to most efficiently produce desired goods from available resources.
Beyond very small, self-sufficient economies, economic calculations require the rational comparison of alternative means of producing functionally-similar end-goods. Even under given technological know-how, there are near-infinite permutations of alternative production processes.
Choosing between them requires comparison of the relative efficiency of different production alternatives. And since each production alternative uses a different mix of incommensurable resources (labour of different skills, various raw materials, land, time and intermediate machines), an agent making such decisions needs to be able to compare the total cost of different baskets of resources.
How do you compare 100 hours of semi-skilled labour against 1 ton of steel? How do you compare the use of 1 acre of land for a month against 10,000 KWH of electricity?
In a market economy, the answer is given by prices. Prices convert each resource to a common unit (money), allowing comparison of the cost (or value) of different combinations of production choices.
But meaningful prices can only emerge through the negotiation of independent buyers and sellers. When all the means of production are owned by the same entity, there are no independent buyers and sellers to negotiate prices. Without prices, one cannot rationally weigh the different cost associated with production choices.
Thus in a completely socialist economy, no rational choices can be made regarding production alternatives.
How can you be certain a socialist economy is impossible?
Economic calculations are the rational steps taken to decide how to most efficiently produce desired goods from available resources.
Beyond very small, self-sufficient economies, economic calculations require the rational comparison of alternative means of producing functionally-similar end-goods. Even under given technological know-how, there are near-infinite permutations of alternative production processes.
Choosing between them requires comparison of the relative efficiency of different production alternatives. And since each production alternative uses a different mix of incommensurable resources (labour of different skills, various raw materials, land, time and intermediate machines), an agent making such decisions needs to be able to compare the total cost of different baskets of resources.
How do you compare 100 hours of semi-skilled labour against 1 ton of steel? How do you compare the use of 1 acre of land for a month against 10,000 KWH of electricity?
In a market economy, the answer is given by prices. Prices convert each resource to a common unit (money), allowing comparison of the cost (or value) of different combinations of production choices.
But meaningful prices can only emerge through the negotiation of independent buyers and sellers. When all the means of production are owned by the same entity, there are no independent buyers and sellers to negotiate prices. Without prices, one cannot rationally weigh the different cost associated with production choices.
Thus in a completely socialist economy, no rational choices can be made regarding production alternatives.
Free men are not equal and equal men are not free.
Government is not the solution. Government is the problem.
Government is not the solution. Government is the problem.