Economic Calculation --- The Austrians' Failure

[Agnapostate]

I posted this commentary at one or two other places, but was hoping to hear feedback from those explicitly devoted to Austrian economics. Anyway, an early objection to the inevitable failures of central planning that the self-described socialist USSR had embarked upon on the basis of its failure to incorporate dispersed knowledge and a condemnation of the party dictatorship that state "socialism" involved is found in Peter Kropotkin's 1919 postscript to Words of a Rebel, which was published the year before the publication of Mises's 1920 Economic Calculation in the Socialist Commonwealth. As Kropotkin wrote:

[P]roduction and exchange represent an undertaking so complicated that the plans of the state socialists, which lead inevitably to a party dictatorship, would prove to be absolutely ineffective as soon as they were applied to life. No government would be able to organize production if the workers themselves through their unions did not do it in each branch of industry; for in all production there arise daily thousands of difficulties which no government can solve or foresee. It is certainly impossible to foresee everything. Only the efforts of thousands of intelligences working on the problems can cooperate in the development of a new social system and find the best solutions for the thousands of local needs.

The entire libertarian approach went virtually ignored by the Austrian school (Mises did devote an irrelevant cutting remark to Proudhon in his essay without actual argument), which placed focus on central planning mechanisms and procedures on account of the emergence of them in the economic structure of a country which was to later become a superpower of the world. That was their first failure.

Secondly, democratic market socialists have progressed beyond the mere punch in the gut that the development of the bureaucratic Lange model presented to Mises and have utilized Hayek's insights into dispersed knowledge problems to form a sound basis for advocacy of a decentralized market economy reliant on workers' ownership and management and in some cases a stakeholder economy, with Theodore Burczak in particular being integral in the development of "post-Hayekian" socialism, which even major Austrian scholars have admitted is serious. With the absence of any major Austrian argument against dispersedly planned socialism (with Mises incorrectly dismissing much of it as "workers' syndicalism," which he regarded as a form of capitalism), and the more recent development of adaptation of Hayek's insights by market socialists, have the Austrians now truly lost the economic calculation debate?

 

[hugolp]

I dont get it. Cutting through all the high-sounding words, what you are proposing is just that people arrange themselves without a central goverment dictating the rules. And that is exactly what the austrians are proposing.

So I guess the big difference is that you dont support private property, right? If that is the case, how would people organize? And if that is not the case, what is the difference then?

 

[Agnapostate]

I dont get it. Cutting through all the high-sounding words, what you are proposing is just that people arrange themselves without a central goverment dictating the rules. And that is exactly what the austrians are proposing.

I certainly understand that the Austrian-inclined regard presently existing capitalism as illegitimate and "corporatist" in nature, and their own vision is substantially different. It's just that I believe not only that market power will inevitably be so extensive in a capitalist economy that the orthodox firm will be afflicted by dispersed knowledge problems that a consistent Hayekian would object to, but that there simply wasn't any attention paid to stateless or libertarian socialism by the Austrians during the beginning of this debate, and there's now no sound objection that can be offered to decentralized market socialism and similar economic models, meaning that several variants of socialism have bypassed the Austrian critique entirely.

So I guess the big difference is that you dont support private property, right? If that is the case, how would people organize?

I personally advocate the abolition of markets and the establishment of horizontal confederations of decentralized collectives and communes managed through participatory, bottom-up direct democracy, i.e. the traditional anarchist vision, specifically anarchist communism according to my preferences. But as a relatively non-sectarian libertarian, I'm partial to all forms of legitimate socialism.

 

[rp08orbust]

I certainly understand that the Austrian-inclined regard presently existing capitalism as illegitimate and "corporatist" in nature, and their own vision is substantially different. It's just that I believe not only that market power will inevitably be so extensive in a capitalist economy that the orthodox firm will be afflicted by dispersed knowledge problems that a consistent Hayekian would object to, but that there simply wasn't any attention paid to stateless or libertarian socialism by the Austrians during the beginning of this debate, and there's now no sound objection that can be offered to decentralized market socialism and similar economic models, meaning that several variants of socialism have bypassed the Austrian critique entirely.

Here's an objection: What's mine is mine.

 

[Agnapostate]

Here's an objection: What's mine is mine.

That's an ethical objection that's fundamentally wrong and that I'd be happy to address in another thread, but I'm seeking commentary specific to the economic calculation problem here.

 

[rp08orbust]

That's an ethical objection that's fundamentally wrong and that I'd be happy to address in another thread, but I'm seeking commentary specific to the economic calculation problem here.

But economics is a study of human behavior, and it's a fact of human nature that we are born with a sense of "mine", whether you like it or not.

How do you propose to eradicate it from our nature if you are opposed to suppressing it through a coercive state?

 

[Agnapostate]

But economics is a study of human behavior, and it's a fact of human nature that we are born with a sense of "mine", whether you like it or not.

How do you propose to eradicate it from our nature if you are opposed to suppressing it through a coercive state?

Since I propose neither the elimination of possessive property nor the existence of state apparatus, these comments are rather inapplicable to me anyway. What can you say to these decentralized socialist models' bypass of the price and knowledge problems...while capitalist economic structure is dependent on central planning and individual orthodox capitalist firms are susceptible to dispersed knowledge problems?

 

[hugolp]

I certainly understand that the Austrian-inclined regard presently existing capitalism as illegitimate and "corporatist" in nature, and their own vision is substantially different. It's just that I believe not only that market power will inevitably be so extensive in a capitalist economy that the orthodox firm will be afflicted by dispersed knowledge problems that a consistent Hayekian would object to, but that there simply wasn't any attention paid to stateless or libertarian socialism by the Austrians during the beginning of this debate, and there's now no sound objection that can be offered to decentralized market socialism and similar economic models, meaning that several variants of socialism have bypassed the Austrian critique entirely.

I really dont care about the names you put to things, I am trying to understand what you are proposing in reality. I have seen that socialist tend to adopt the attitude of capitalism = bad, socialism = good, without even bothering to check what those words really mean for each one. In my country, the socialist party has been the longest in power, and they have turned to be a bunch of corrupt thieves. So please, cut the high sounding words, and lets just leave the discussion to real solutions.

I personally advocate the abolition of markets and the establishment of horizontal confederations of decentralized collectives and communes managed through participatory, bottom-up direct democracy, i.e. the traditional anarchist vision, specifically anarchist communism according to my preferences. But as a relatively non-sectarian libertarian, I'm partial to all forms of legitimate socialism.

So, if there is no market, no trade, how do this confederations exchange goods? They dont?

Also direct democracy can work sometimes for small group of people, but its just imposible for large group of people. And democracy is a market. You are just changing money for political favours, and you are just changing the hability to trade for the hability to have political influence.

But lets imagine your system gets implemented. Lets imagine you have a confederation of 50 people working in a small town, and they get along properly and produce development. They start building machines and start producing efficiently and can work less hours, etc... So the town near them likes that and 400 people move to the efficient town. The 400 are a majority and just start living from the work developed by the 50 without contributing, but the 50 can not do nothing since they are a minority. Is my example silly since that can not happen? why? and if it can happen, do you think is fair?

 

[Agnapostate]

I really dont care about the names you put to things, I am trying to understand what you are proposing in reality. I have seen that socialist tend to adopt the attitude of capitalism = bad, socialism = good, without even bothering to check what those words really mean for each one. In my country, the socialist party has been the longest in power, and they have turned to be a bunch of corrupt thieves. So please, cut the high sounding words, and lets just leave the discussion to real solutions.

I'm certainly among the socialists who try to emphasize the use of clear and accurate terminology rather than the abuse of words, which is why I'd suspect that your "socialist party" is nothing of the sort. They most likely describe themselves as such as a means of appealing to populist sentiments.

So, if there is no market, no trade, how do this confederations exchange goods? They dont?

Mere exchange is not a sufficient condition for a market to exist. Any complete market must incorporate the development of prices based on competitive exchange patterns. Mere cooperative exchange certainly isn't sufficient.

Also direct democracy can work sometimes for small group of people, but its just imposible for large group of people. And democracy is a market. You are just changing money for political favours, and you are just changing the hability to trade for the hability to have political influence.

I hold that the decentralization and participatory structure of the organization that I advocate would prevent these problems, but I don't see how this is directly related to the economic calculation problem.

But lets imagine your system gets implemented. Lets imagine you have a confederation of 50 people working in a small town, and they get along properly and produce development. They start building machines and start producing efficiently and can work less hours, etc... So the town near them likes that and 400 people move to the efficient town. The 400 are a majority and just start living from the work developed by the 50 without contributing, but the 50 can not do nothing since they are a minority. Is my example silly since that can not happen? why? and if it can happen, do you think is fair?

There can never exist a mechanism that truly prevents the tyranny of the majority except the consolidation of high-grade weaponry in the hands of the minority, perhaps. In our present state of affairs, it's a conceivable possibility for a majority to overwhelm and enslave a minority through strength of numbers alone. That said, I'd be happy to discuss anarchist communism or general socialism more broadly, but we should probably stay on-topic and focus on the application of the economic calculation problem to that model and the other forms of decentralized socialism that I mentioned in this thread.

 

[rp08orbust]

Since I propose neither the elimination of possessive property nor the existence of state apparatus, these comments are rather inapplicable to me anyway. What can you say to these decentralized socialist models' bypass of the price and knowledge problems...

If it is completely voluntary, I say "go for it."

while capitalist economic structure is dependent on central planning and individual orthodox capitalist firms are susceptible to dispersed knowledge problems?

I say let those firms grow until their inefficiencies cause the market to break them up, which it will do, unless a more powerful state is there to prop up the otherwise failing firms.

 

[Agnapostate]

If it is completely voluntary, I say "go for it."

I believe it would be, but that you'd describe it as "involuntary" because I advocate the expropriation of the means of production from their private owners. Probably best to put that in another thread, though.

I say let those firms grow until their inefficiencies cause the market to break them up, which it will do, unless a more powerful state is there to prop up the otherwise failing firms.

That won't occur, as market and wealth concentration prevent it; that's the very essence of market power. If that did occur, we'd see more efficient variants of firm organization (such as workers' ownership and management) emerge spontaneously.

 

[hugolp]

I'm certainly among the socialists who try to emphasize the use of clear and accurate terminology rather than the abuse of words, which is why I'd suspect that your "socialist party" is nothing of the sort. They most likely describe themselves as such as a means of appealing to populist sentiments.

Mere exchange is not a sufficient condition for a market to exist. Any complete market must incorporate the development of prices based on competitive exchange patterns. Mere cooperative exchange certainly isn't sufficient.

I hold that the decentralization and participatory structure of the organization that I advocate would prevent these problems, but I don't see how this is directly related to the economic calculation problem.

There can never exist a mechanism that truly prevents the tyranny of the majority except the consolidation of high-grade weaponry in the hands of the minority, perhaps. In our present state of affairs, it's a conceivable possibility for a majority to overwhelm and enslave a minority through strength of numbers alone. That said, I'd be happy to discuss anarchist communism or general socialism more broadly, but we should probably stay on-topic and focus on the application of the economic calculation problem to that model and the other forms of decentralized socialism that I mentioned in this thread.

Yes, but if I dont have the slightlest idea of how the system you propose works, then I can not discuss how economic calculation happens in that system.

So a small introduction or a link to a small introduction would be a good start. Let me emphasize the small part, since I am not going to loose my time in reading a long piece, when my previous experiences with socialist aproach have turned to be mainly bullshit wrapped in nice words. Dont get me wrong, how you talk sounds good and interesting, but I recomend something short to keep our attention.

Also, can you answer how this confederations would exchange goods if there is not a price mechanism?

 

[Agnapostate]

So a small introduction or a link to a small introduction would be a good start.

Have a look at this, then. It's the best introductory material out there, IMO.

 

[rp08orbust]

I believe it would be, but that you'd describe it as "involuntary" because I advocate the expropriation of the means of production from their private owners. Probably best to put that in another thread, though.

Indeed, if you attempted to "expropriate" anything of mine that you happened to consider a "means of production", I would probably shoot you.

That won't occur, as market and wealth concentration prevent it; that's the very essence of market power. If that did occur, we'd see more efficient variants of firm organization (such as workers' ownership and management) emerge spontaneously.

As long as the state exists, we can't say what might spontaneously emerge in a free market, can we?

 

[hugolp]

Have a look at this, then. It's the best introductory material out there, IMO.

Sorry, I tried but that is full of bullshit. I am an engineer, and come from a scientist family. All that logic without grip on reality doesnt impress me at all. In fact, praexology is the part that I dislike of the austrians.

I still dont understand how you would acomplish a society without private property, and how you would manage to stop some individuals from using force to gain private property.

Also, I dont understand how you dont trade without a market. Even if you are bartering without money, that is a market. Or if you dont define bartering as a market, fine, but I dont see the implications of not using money, you are just limiting trade, making it more complicated, but there is still a "fight" to get the best deal.

 

[Agnapostate]

Indeed, if you attempted to "expropriate" anything of mine that you happened to consider a "means of production", I would probably shoot you.

Since the financial class consists of a small and elite number, they'd find themselves six feet under if they tried to violently resist the vast majority who came to dispossess them. It's all a numbers game, so you'd be the one to be shot.

As long as the state exists, we can't say what might spontaneously emerge in a free market, can we?

No, but any legitimately free market will necessarily be socialist in nature and maintain the public ownership and management scheme that I mentioned. A capitalist market will inevitably be characterized by restrictive barriers to entry that slap "freedom" in the face, especially without the expansive government structure required for sustainment purposes.

Also, I dont understand how you dont trade without a market. Even if you are bartering without money, that is a market. Or if you dont define bartering as a market, fine, but I dont see the implications of not using money, you are just limiting trade, making it more complicated, but there is still a "fight" to get the best deal.

This was the only part of your post truly relevant to the socialist calculation debate, though it's still somewhat disconnected, especially considering that you've chosen to cheerily ignore the answer to the question you asked. The point here is that competitive barter and exchange is not the standard arrangement in collectivist or communist economic structure; public provision of goods and services in compensation for labor input is.

 

[hugolp]

This was the only part of your post truly relevant to the socialist calculation debate, though it's still somewhat disconnected, especially considering that you've chosen to cheerily ignore the answer to the question you asked. The point here is that competitive barter and exchange is not the standard arrangement in collectivist or communist economic structure; public provision of goods and services in compensation for labor input is.

How can you have a public provision of goods and services without a central planed economy?

And I know this is not about what you want to argue but I really dont understand your system. If you dont want to explain it then dont answer and I will be done with the discussion.

 

[angelatc]

Why in the world do we attract everybody *but* people that support Ron Paul's ideas these days?

 

[Agnapostate]

How can you have a public provision of goods and services without a central planed economy?

And I know this is not about what you want to argue but I really dont understand your system. If you dont want to explain it then dont answer and I will be done with the discussion.

I just provided you with a link that you ignored that offered a basic explanation of social anarchism and the decentralized economic planning that it entails.

 

[hugolp]

I just provided you with a link that you ignored that offered a basic explanation of social anarchism and the decentralized economic planning that it entails.

I have tried. I have even gone through the web you have pointed me (btw, the home page of anarchysm goes to a dead link, you may want to repair that since it gives a horrible impresion).

Mainly I have found in that page capitalism bashing, and very little constructive. Is anarchysm capable of defining itself on its own, or does it needs capitalism?