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Economic Calculation in the Socialist Commonwealth Paperback – June, 1990


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Language Notes

Text: English (translation)
Original Language: German
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Product Details

  • Paperback: 74 pages
  • Publisher: Ludwig Von Mises Inst (June 1990)
  • Language: English
  • ISBN-10: 0945466072
  • ISBN-13: 978-0945466079
  • Product Dimensions: 0.5 x 5.8 x 8.8 inches
  • Shipping Weight: 4 ounces
  • Average Customer Review: 4.4 out of 5 stars  See all reviews (5 customer reviews)
  • Amazon Best Sellers Rank: #2,779,992 in Books (See Top 100 in Books)

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37 of 37 people found the following review helpful By D. W. MacKenzie on September 8, 2000
Format: Paperback
Economic Calculation in the Socialist Commonwealth sent shockwaves though the academic world when it appeared in 1920. Following World War One many scholars were fascinated with the newly formed Soviet Union. Would the USSR live up to the romantic expectations of Marxists? Could some other form of socialism work better? Was capitalism doomed? Ludwig von Mises answered these questions with a resounding no.

Mises identifies THE critical problem in socialist economics- the lack of a means for allocating capital goods. Once the state owns the means of production markets for capital goods disappear. Market prices for capital goods emerge through competitive biding as entrepreneurs estimate the values of different capital goods. If we abandon markets, central planners must still choose between alternative capital goods, but they will not have market prices to guide them. Since all value is in use and is subjective, central planners face an impossible task when they try to ascertain relative values for capital goods. Mises proves that in a dynamic, changing world of subjective value and complex productive processes, markets are an indispensable means of organizing production.

Mises described the calculation problem more fully in his book, Socialism, and Economic and Sociological Analysis. In my own experience, reading the 1920 essay is not enough to understand the full calculation argument. Economic Calculation in the Socialist Commonwealth is, however, and excellent starting place for understanding the problems of socialism. Every socialist should read this essay, along with the more complete version of the calculation critique in "Socialism", and with Hayek's books "Individualism and Economic Order" and "The Road to Serfdom".
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34 of 34 people found the following review helpful By T. Rosati on December 7, 2001
Format: Paperback
In "Economic Calculation in the Socialist Commonwealth", the late Ludwig Von Mises, one of the leading economists of the Austrian School, takes aim at the foundations of Socialism. Von Mises argues that under Socialism, that is the abolition of private property and state control over production, economic calculation is impossible. This short 51 page essay and summary by Professor Joseph T. Salerno of Pace University demonstrates that a socialist economy cannot be rational and thus provides no way to assign resources to their most productive uses. It is too bad this 1920 piece was not read by more intellectuals. We could have avoided 70 years of ruin under communism. His argument is not a moral attack but one of practicality. Even assuming that central planners are honest, selfless, motivated and intelligent individuals, how do they allocate resources and plan production without market signals and a common exchange medium (money) that quantifies these signals? In simplest terms how can central planners make decisions without a feedback loop that conveys scarcity, needs and desires?
Von Mises makes several key points:
1) Monetary calculation is an indispensable tool for choosing the optimum among a vast array of production plans.
2) The "intellectual division of labor" (i.e. demand signals) which emerges when individuals (i.e. property owners) are at liberty to exchange goods and services creates subjective value judgements which are then totaled to derive an objective monetary exchange rate. Prices are just the objective reflection of the sum of millions of individual subjective valuations. Such a process does not exist in a socialist economy where the thought process resides the heads of a few bureaucrats.
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With the abolition of private property is the abolition of economy. The intolerance of proprietorship which defines Socialist schemes is the central deficiency from which the ideology has no prospect for recovery. Without property owners looking out for their own self interests, economic calculation (pricing, etc.) cannot take place. The state is alien to exchange.
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I was familiar with the contents. The book quality met my expectations; it was readable and well priced. Shipment time excellent.
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5 of 15 people found the following review helpful By Lemas Mitchell on November 27, 2008
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But this book just didn't do as good of a job as it might have in bringing that across.

A good way to start would have been to take several hypothetical socialist markets/ cases and then show what problems might have arisen in making calculations. Instead, the book came across as more a series of floating abstractions.

It was a decent book, just not terribly interesting.
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