The state of mother nature is “exploitation”.

I often encounter socialists clinging to the Labor Theory of Value, which is absolute garbage that even Marxist intellectuals admit is wrong and distance themselves from.

According to these socialists, “Surplus value” is anything above the wage that is gained from the sale of the good.

So I gotta ask, is all the plant and equipment, labor of others (including management), savings and investment and consequent assumption of entrepreneurial risk just to be donated?

If they truly believe that labor is the source of all value, then it would have to be in line with the value of a good that they can create with their bare hands and without raw materials other than what they find in the commons (tragedy of it and all).

Also, the wage laborer gets paid NOW and does not risk loss in an uncertain future where the price of the good sold is unknown (if it sells at a profit at all).

LTV gets blown up in the first 10 minutes of this:

Bohm-Bawerk and Mises both crushed Marxism.

Here:

And here:

Rothbard dissects the arguments and rebuttals related to the Economic Calculation Problem posed by Mises here:

The End of Socialism and the Calculation Debate Revisited

Marx, even in his writings used two different definitions of “capitalism” to suit his argument.

He defines it two different ways. In the manifesto, he says it is just free selling and free buying. In other writings, he uses government monopoly privileges bestowed upon the well-connected as “capitalism”.

All the critiques were of mercantilism/protectionism, which is where the present day socialists get the “capitalism requires a state”.

Source on this point: https://mises.org/library/marx-and-mercantilism

If a socialist is truly trying to “free” you, he wouldn’t advocate for a system that would require total domination over you.

How much control over people would be needed?

Total.

It is not compassionate.

It is not freedom.

It is utter tyranny.

And it fails on economics as icing on the shit cake.

For the history you didn’t learn in school, check out Liberty Classroom:

The post Mother Nature, the Ultimate Exploiter appeared first on Actual Anarchy.

Patrick MacFarlane of Liberty Weekly recently became a lawyer and joins us to discuss one of his favorite movies, Liar Liar. Jim Carrey is pretty much a commie these days, but still had a pretty good run of comedy films in the 90’s. This film did not age well, but the premise hinges on how courts often side with the woman at the expense of the man in family court, which gives us plenty to talk about.

The truth shall set you free – or get you into a lot of trouble! Comic genius Jim Carrey pulls out all the laughs in Liar Liar as the fast-talking attorney and habitual liar who, forced by his son’s magical birthday wish, must tell the truth for the next 24 hours. He soon discovers that his biggest asset – his mouth – has suddenly become his biggest liability in this heartwarming and “outrageously funny” (New York Post) smash hit!

Never miss an episode. Subscribe on Apple Podcasts to get new episodes as they become available.

Editorial Review on Amazon

In this uproarious hit from the director and producers of The Nutty Professor, comic genius Jim Carrey stars as a fast-talking attorney and habitual liar who, forced by his son’s birthday wish, must tell the truth for the next 24 hours. Co-starring Jennifer Tilly, Swoosie Kurtz and Amanda Donohoe.

Siskel & Ebert gave Liar Liar “Two thumbs up!”

If you’re in the market for web-hosting (and if you aren’t doing things online to create content or products, we highly suggest it), you can’t go wrong with selecting Blue Host as your providers. We’ll give you a shout-out, backlink, and undying gratitude if you buy your hosting through our link below:

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Our guest Patrick MacFarlane is a Rothbardian Ancap practicing lawyer in the State of Wisconsin.  He runs Liberty Weekly, Your weekly source of classical liberalism, Austrian Economics, personal liberty, and free markets! and hosts the Liberty Weekly Podcast. You can also find him at the Libertarian Institute and the Libertarian Union.

Here are the previous appearances by our guest:

Episode 48 – The Shining (1:58:12)

Episode 35 – Rogue One (1:16:05)

And here are our guest appearances on his show:

How to Talk to Statists: A Report From Larken Rose’s “Candles in the Dark” Feat. Actual Anarchy Ep. 26

The Death of Hollyweird? Feat. Actual Anarchy Ep. 37

Finally, here is the series with Liberty Weekly where we discussed the Netflix Documentary “Wild, Wild Country”:

Liberty Weekly Summer Special: Wild Wild Country

http://www.libertyweekly.net/wwc

The bonus content can be accessed via supporting us on Patreon at:  http://www.actualanarchy.com/patreon

We’ll be back next week to discuss a movie that Robert and I watched together during his visit (where he caught illness from our kids) called “Green Room” (which is available on Amazon Prime – click the link to get a free trial!).  I hope you’ll join us!

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You can find the website for the Last Nighters at:  www.LastNighters.com

In fact, we just launched the Last Nighters as a Podcast feed, you can find it on iTunes here: https://itunes.apple.com/us/podcast/the-last-nighters/id1384886334

And also at Anchor.FM where you can even leave us messages of up to one-minute long that we can plug into the show, and respond to. Give it a try and we’ll see how it works together!

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For the history you didn’t learn in school, check out Liberty Classroom:

Here is the link for the Mises Quotes page on Facebook:

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Having an argument on Facebook about economics?

Is someone bashing Uber in favor of the taxi industry?

Which lecture(s) was it where Rothbard discussed taxi medallions and price controls in the taxi industry?

It can be hard to remember.

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You can quickly find what you are looking for.

This tool will help you find the exact timestamp of when Rothbard talks about a specific topic you searched.

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Thank you for joining us on this episode of the Actual Anarchy Podcast!

The Actual Anarchy Podcast is all about Maximum Freedom.

Robert and I analyze popular movies from a Rothbardian/Anarcho-Capitalist perspective. If it’s voluntary, we’re cool with it. If it’s not, then it violated the Non-Aggression Principle and Property Rights – the core tenants of Libertarian Theory – and hence – human freedom.

We use movies as a starting point for people who may not be familiar with this way of thinking. Discussion of the plot and decisions that characters make in relation to morality and violations of the non-aggression principle are our bread and butter.

We also will highlight and discuss any themes or lessons from Austrian Economics that we can glean from the film.

The point is to show what anarchy actually is with instances that are presented in film.

We publish new episodes on Sunday just in time for your Monday commute; and occasionally will do specials surrounding holidays or events (elections/olympics).

For our show where we talk about movies from a Rothbardian/Anarcho-Capitalist perspective, we often watch them on our various devices via Netflix, Amazon Prime or on VUDU (which lets you redeem UV content as well). The VUDU one is nice because once it is in there, you know it will still be there a few months later:

ABOUT

Actual Anarchy, an anarchy unlike what the average idiot thinks it would be. Anarchy means no rulers, not no rules. The non-aggression principle and a respect of property rights are what makes it go.

We host a podcast where we take pop culture movies and showcase moments or scenes or themes throughout that are literally actual examples of anarchy.

Any place, around the world, there are always examples of Actual Anarchy all about you. Sometimes you just have to sit back and take a look. It’s easy once they’ve been pointed out a few times.

Actual Anarchy is real world examples of anarchy in action.

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The post Episode 97 – Liar Liar (1:07:28) appeared first on Actual Anarchy.

Otherwise, you would have a difficult time in organising the slaves and call yourself “the government”.

To destroy your nation’s economy, you need to abhor freedom of others. If you lack this quality, you are not “mentally fit” to envy and expropriate others. All your actions can be justified by a piece of paper called “constitution”. There’s nothing to worry about, except anarchists.

Second thing, you should never learn economics. What matters is sociology because it helps us to “screech autistically” and attain the status of victimhood, followed by a biased understanding of the history subject.

By the way, if you come across any “critical thinker” or “learned person” then it is your moral duty to shun his/her opinion without using facts, but sentiments.

Anyway, the above premises are the fundamental and foundational qualities to embrace the civility of a good politician. Only Ron Paul can be a bad politician because he does not support this guide/blog. I condemn him for that.

To begin with:

Power does not corrupt. Absolute power does not corrupt absolutely. It’s the limited power which corrupts the economy wholly. In fact, unlimited power is the science of getting things done without being accountable at all. Without power, you cannot choke down your imbecilic imaginations on anyone’s soul.

Money is the Kim Kardashian of the economy. If you don’t know how to spank (spend) the paper then you are unfit to be a politician. All you have to do is print the paper out of thin air. It is uneconomical to back the paper with gold or any other commodity because it would end up empowering your slaves and they would devalue you later.

Muscles: Kindly sign up with your nearby local mafia gang without letting them know that you’re the best mafia in town. Delude them but pay them handsomely. You need muscle power, along with money power, to get the people obey you decently. Call them “cops” instead?

Monopoly: Imagine people listening to you or obeying you without questioning you or regulating you? It is possible if you prioritise the power of monopoly without sharing it with others. As long as you have the monopoly with yourself, people won’t take you jokingly. Your uncontrollable attitude towards monopoly will determine the course of people’s aptitude and political altitude.

Sadism: All your political speeches should look diplomatic and manipulative. If any trait is missing then you won’t achieve the aim. I know that you are always orgasmic to screw people’s wealth but please ensure that you’re not letting them know, otherwise who would suck their liberties? Try to camouflage your opinions as if you’re the only romantic person in the economy, without letting your people know that you’re going to economically BDSM them, without their consent.

Propaganda: Buy as much as media you can, but on the mainstream level. Anyway, social media memes have limited reach. If some of the media houses don’t gibe with your ‘policy’ then over-regulate their “freedom of expression”. Automatically, the media would love to appreciate your narcism (if you can make them sleep with you over a bottle of whisky). Propaganda is an art of showing yourself clean when you’re not. Imitate the propaganda models of Nazi Germany, Soviet Union, or Trumperica, to begin with.

Regulation: Your chances of getting re-elected is lower if you minimise the regulations. Already people are addicted to submission, fear and violence so it makes sense for you to supply them with more laws, rules and regulations. Make the “book” more technical, biblical and draconian so that you can create more jobs and consultancy firms and the regulatory captures. If you minimise the regulations, you lose your presence  in the history of global economy.

Ideology: Don’t use “isms” at all but do translate the theory into action. For example: You can say that “we believe in democracy” (which is, of course, a mild version of communism) without letting the “social scientists” know that you’re actually doing fascism or communism. I know that you cannot “convince” the mass society all-the-time but you can surely “confuse” them with the ideologies. Develop a “public sphere” and [discursive] “marketplace of ideas” so that people fall for it, and you end up diverting them from the unimportant issues like economics freedom, property rights, judicial independence, etc.

People’s wealth is your wealth. Your wealth is your wealth only. Just don’t forget to use the term “people” in your speeches or else people won’t fall for your Ponzi schemes. The best way to get more wealth from people is to tax their every function, including non-economic ones. They would believe that you’re creating the wealth in the economy, and that’s what matters for the economy of “social security”. When it comes to taxation, always ignore knowing that it is the “compulsory fee” which we pay for the uncivilization.

War: Anything you can do constitutionally is fun. For example: You will be charged for murder if you’re not from the government. You can have more wars so that you can create more jobs through inflation, wealth through defence industries, and popularity through media. War is the health of your political stability. It should make you look powerful, no matter how you’re.

Fair Trade: There is nothing called “free trade”. I mean it is so insane to learn that people can voluntarily trade with another without coercion. The idea of “fair trade” makes sense because it can help you to play with the currencies and trade conflicts at your political whims. The more you bring fairness in trade, the more people would legitimise your defence policy.

Conclusion: If you’re not convinced to be a politician then you need to reread this piece.
_______________________________________________________

About the author
Prof. Jaimine Vaishnav is an anarcho-capitalist based in Mumbai, India. His hobbies are about defending the liberties of all his dissents without charging any fee.

Twitter a/c
@meritocratic
_______________________________________________________

The post A Political Guide To Destroying Your Economy appeared first on Actual Anarchy.

Our newest contributor, Morten Rolland, has some thoughts on the matter.

“It’s amazing what you can accomplish when kindness and the happiness of others is your goal.”

Right. It’s amazing what you can accomplish, when the goal is to plunder your neighbors and force others to fund your own goals in life…

Although as far as Mr. Rogers goes, this video just shows him as a good man with a wrong opinion.

It’s hard to fault him for wanting to find funding for his show, since a portion of that specific market was being claimed and de facto monopolized by the state. Also, what he essentially did was finding a way to get back some of the tax money, that was stolen from him, his loved ones and the parents of the children he created the show for, and finding a more rational use of those tax dollars.

At the end of the day – in this case, the moral blame lies with the politicians who legislated the theft of other people’s money, in order to fork it out to whomever they please, like in this case:

$20 million dollars

Those $20 million came from someone, but that was of no worry for this Senate Subcommittee member. He seemed not to care so much about the amount and where they came from. That was of no relevance to him. After a few minutes, he was ready to throw them in a stranger’s face.

And if you take the analysis a little further, the fundamental blame lies in ordinary people’s support of the system, by voting big government statists into office and having them plunder everyone’s neighbors. As such, people get the system they deserve, and as a libertarian you must play with the cards you’re dealt.

This means it’s everyone’s self-interest and legitimate option to take what they can, when they can, because if not, you can be certain your pockets will be emptied by the next day.

That is the socialist system, by which the resources of society are pooled together into a massive tragedy of the commons. You’d be “altruistically stupid” to only be the victim of plunder and never try to defend your own livelihood…

It’s true, you can’t morally support the system. That’s why you must always seek to stop the public plundering of resources, thereby upholding your morality, but as long as might is right in this socialist world, you better also defend yourself as much as you can!

Mr. Rogers openly endorsing public funding might have crossed the moral line from self-defense to support of the system, and that was his wrongdoing, but in his context it’s certainly easy to understand and rationalize why he did so.

For the history you didn’t learn in school, check out Liberty Classroom:

The post The Kindness of Mister Rogers appeared first on Actual Anarchy.

I am not an Indologist but I live in India. In this article, I do not intend to divulge the marketing skills of my authorship but helping my international amigos to know the features of Vedic anarchism. To begin with, the Vedas are a large body of knowledge texts originating in the ancient Indian subcontinent.

Composed in the Sanskrit language, the texts constitute the oldest layer of Sanskrit literature and the oldest scriptures of Hinduism. Hindus consider the Vedas to be apauruṣeya, which means “not of a man, superhuman” and “impersonal, authorless”. Vedic anarchism period existed in Bhaarat (India) between 4000 BC – 500 BC. But, in today’s time, in India as elsewhere, the anarchist thought is widely misunderstood. As Bhagat Singh (1907–1931), one of the few Indian revolutionaries who had explicit anarchist leanings, put it:

“The people are scared of the word anarchism. The word anarchism has been abused so much that even in India revolutionaries have been called anarchist to make them unpopular.”

Vedic anarchism is a fearless trek into the unknown. Since it throws out the imposed normative ideals of other political philosophies, Vedic anarchism prescribes complete sacrifice of the ego of a politically-driven mind. It forebodes the usual prescriptions and solutions for society’s ills and trusts the forces of cooperative effort, mutual respect, and mutualism will do better. It’s the respect for the limits of human reason, the fallibility of human power, the unlikely, but unsurpassed, power of unconscious design, the appreciation of innovation and progress brought about by forces completely out of our control and, above all, humility – the recognition of one’s own mistakes, flaws, ignorance, and inability to know the unknown.

Vedic anarchism is the “spiritual recognition” of our ultimately unprivileged position in the world, the acknowledgement of the fact that we are systematically ignorant of the crucial forces that the fabric of social life depends on, and to embrace this dynamism of life is to live happily and freely. To reject the conservatism of coercion, hierarchy, and central planning, to see that only a virtuous, impassioned people are capable of developing and maintaining the peaceful emergent orders that allow humanity to flourish requires the humility that only honest and everlasting introspective analysis can provide. Vedic anarchism emphasises that only constant self-questioning accompanied with self-improvement will reveal what our lives and our happiness ultimately count on.

Unlike the modern Western Anarchist theories, the Vedic Anarchism is a time tested and successfully established anarchist model of the ancients. The rishis (saints) who have given Vedas are the first founders of Vedic anarchist societies. They dwelled in forests outside the control of any state or governments or monarchies and enforced a values-based living through the knowledge on Rta (principle of self-regulation and universal coordination) and dharma (right way of living is achievable through non-aggression).

Unlike the Western anarchism that emphasises priority to anti-state and anti-rulers policies, Vedic Anarchism primarily deals with self-consciousness, non-hierarchical and decentralised polity, community living, and ecologically sustainable lifestyles through its varna, ashrama, dharma, and janapada system.

The term “Janapada” literally means the foothold of the people.  The Janapada system created a non-hierarchical and decentralised polity of root-level democracy.

The dharma system is wisdom in action. The wisdom that brought awareness about natural and social powers is known as Rta. This system attempted values-based living and brought ecologically sustainable lifestyles.

The dharma system is wisdom in action. The wisdom that brought awareness about natural and social powers is known as Rta. This system attempted values-based living and brought ecologically sustainable lifestyles.

The ashrama system empowered individual freedom and independent expressions. Based on the biological age, the needs and behavior of individuals are categorized as:

1) Student life,

2) Householder life,

3) Retiring life, and

4) Renouncing life.

The Vedic varna system ensured swadharma-based entitlements that brought flexibility, non-hierarchical and decentralised distribution of powers among all the communities for a balanced society, smooth inter-dependency, as well as deals with social responsibilities.

From these Vedic systems, arose the Mahajanapada system that formed the basis of all kingdoms and republics of India. This system administered the root-level distribution of political, technological, economic, and social powers.

All of the ancient Vedic period states followed grass-root democracy raising from the village communities. The Vedic polity of root-level democracy has turned the entire India as a community and village-based society. These villages were, in Vedic times, completely self-sufficient, self-governing, cooperative, nature bound and ensured complete independence from the state and its politics.

Thomas Munroe, Charles Metcalfe, and Mark Wilks are a few of the Orientalists who have eloquently described these importance village communities held in India. Because of the Janapada system, anarchism ruled the roots and roosts of India, irrespective of kings and other types of rulers. C.F. W. Hegel finds that this system ensured the whole of India and her societies not yielding to despotism, subjection, or subjugation of any rulers. Its influence is very strong and far reaching, even in the colonial period, the colonialists found that the establishment of Vedic anarchism through its village communities as the most difficult barrier to break and could not completely enforce their hegemony.

To know more about Indian anarchist thinkers, please read my reblog on Anarchy India portal.
_________________________________________________________

About the author

Prof. Jaimine Vaishnav is an anarcho-capitalist based in Mumbai, India. His hobbies are about defending the liberties of all his dissents without charging any fee.

Twitter a/c
@meritocratic

The post Vedic Anarchism appeared first on Actual Anarchy.

It is just not a belief but also a modern ideology. They worship this political ideology, like the way jihadists worship Islam, but without directly initiating violence. The tribe also believes that it is morally correct to have freedom in all economic activities because they trust the principles of government-constituted free market.

When it comes to defense, police and courts or law, the tribe would not mind distrusting the principles of laissez-faire. To add, the tribe does not realise that it suffers from a psychotic disorder called ‘stockholm syndrome’ (which means, sympathising with the crime doer).

For example: they chant, blog & podcast “government is evil” (without realising that they’re the ones who are always eager to necessitate the evil at the expense of everyone else). They tend to forget that ‘limiting’ the evil does not equate to abolishment of evil.

Evil is evil, no matter what’s the size of it.

I do not intend to bash these intellectuals in this article. I am simply analysing their unnoticed hypocrisy.

What makes their myth so different from other political ideologies like democracy, communism, etc., when their own ideology is a diet coke of all the fascist tendencies?

On one hand, they condemn monopoly of the state. I think it makes sense because monopoly over the means of production is the root cause of all problems in our world.

On the other hand, the tribe believes that a magical constitution would suddenly beget “good governance” administered by a “good government”, out of nowhere, in the complex world.

In this regard, how would they behave with their own dissents if the constitution is deemed as a social contract?   A constitution is just not a rule book but also a “social contract”, which makes citizens (slaves) to pay obligation to their master (government) without signing the agreement et al.

This is where the tribe consciously fail to realise with their own eyes that government is a lie.

Governments are “malum in se” (evil in itself) in their nature and violate the non-aggression principle (an ethical stance which asserts that “aggression” is inherently illegitimate).

In this case, let’s assume that taxation is not a legal robbery. Then, why would a ‘limited’ government continue to conscript people’s wealth for the sake of building the roads? What is the fair percentage to consider that taxation is a not a legal theft, when any “illegal” mafia gang can also empower itself to expropriate the people?

While these philosophers continue to claim that the emergence of a government is inevitable and that therefore efforts must be concentrated towards establishing a “minimal government” to protect freedom, but then it cannot prevent its collapse or political suicide without compromising all of its laws and principles.

For example: How would it decide the rate of defence expenditure without inflating the public funds for defence services, which is likely to maximize the monopoly, tax structure and power of the minimal government?

I suggest you to apply the same reasoning/question/logic to “priority sectors” like fiscal policy with reference to populism, monetary policy with reference to printing machine, and property rights with reference to eminent domain.

As the American Experiment has proven, a mechanism like constitutional check-and-balance has not been successful in stemming the tide of governmental expansion. Checks and balances are not enough to successfully distract the members of the ruling class from their convergent interests, since, checks or not, they are still all part of the same parasitical entity.

An exterior standard alone is also not sufficient to stop the governmental expansion. A piece of paper or constitution is only somewhat obeyed as long as its legitimacy remains: the more misinterpreted and controversial it becomes, the least protection it affords against the government’s expansion.

To conclude, coercion cannot produce cooperation.

My facebook note highlights a case of the minimal government sustaining corporatism. Governments are not, and cannot, be based on consent. It is mathematically impossible to maintain a government over a territory of any considerable size without imposing some non-consensual rules.

Furthermore, no government has ever been founded on consent. All governments are based on the necessity for victorious warring factions to organize the taking of tribute from conquered factions, to make organized theft less risky and more profitable. All other governments derived from those have come to existence through ruling class conflicts or colonial politics.

In short, consent of the vast majority of people is nowhere involved in the process of government-creation.

About the author

Prof. Jaimine Vaishnav is an anarcho-capitalist based in Mumbai, India. His hobbies are about defending the liberties of all his dissents without charging any fee.

Twitter a/c
@meritocratic

The post Diet Coke of Fascism appeared first on Actual Anarchy.

Misunderstanding anarchism is also an auxiliary activity of the mainstream media, public schools, bureaucrats, politicians, and the ignorant populace.

Their imagination isn’t only limited to the belief that ‘government is a magical institution’ but it also extended to the practice that everyone else should also survive within the limits of their perspectives.  If you attempt to reason or discourse with them then they will ensure that you’re ashamed and defamed.

Thus, the burden of proof is not on the anarchists to prove “why freedom is vital” but on the pro-slavery advocates to prove “why people should be forced to live in a system of organised chaos (government)”. 

Worse, some who call themselves “anarchists” don’t even know the meaning of the term. These people fall, in general, into three classes:

1) advocating that state should be abolished and then replacing the society with collectivism spirit, wherein “anarchists” should not be allowed to reap fruits from their own labor,

2) advocating that state should be abolished and then replacing the ‘welfare policies of Stalin’ with the ‘welfare policies of Mao’, and

3) advocating that the state should be abolished and then replacing the society with ‘Trump’.

Therefore, it is also necessary to save anarchism from such “anarchists”.

Many ignoramuses continue to believe that “anarchism is terrorism” because they’re taught to believe that anarchists blow up the buildings, bridges and ‘roads’. This is the height of today’s modern education, in fact.

Anarchists are not the ‘violent creatures’ who believe that people have a compulsory obligation to follow incoherent and illusionary ideologies like republicanism, communism or parliamentary democracy. Instead, anarchists are the ‘voluntary creatures’ who intend to tranquilly denounce the general belief i..e “there should be rulers to police, discipline and indoctrinate the populace”.

Please note that anarchism is not an anti-freedom philosophy that calls for the initiation of violence on peaceful people who simply disagree or dissent, otherwise, why do you think the government officials had such a hard time defining the word “terrorism”?

The answer is that every time they defined the word ‘terrorism’ they admitted to this stunning fact that the government’s action utilises the use of terror on peaceful people. A government can only survive via the initiation of violence of individual’s property rights.

Without the use of terrorism, the government would cease to exist, and a propertarian society would ensue wherein peaceful people are free to do as they wish as long as they don’t infringe on others. In social relations between people, certain voluntary social norms will have to be accepted, namely, the obligation to fulfill a freely accepted agreement.

In this case, it is advisable to ratiocinate [form judgments by a process of logic; reason] that:  anarchism is not anti-rules, but anti-rulers.

To sum up, anarchism is self-government (or its equivalent, self-administration). Self-government is the best form of government, which people rarely talk about because they have more faith in a ‘few strangers’ ruling them and others at the expense of everyone else.

Self-government starts with self-discipline. If you cannot discipline yourself then you have no right to misunderstand anarchism. You can move to North Korea to get policed morally and bodily before bashing the theory of anarchism for the sake of criticism.

The post Misunderstanding Anarchism appeared first on Actual Anarchy.

This article was originally published in The Review of Austrian Economics in 1991, during the collapse of the Soviet Union.

Introduction

At the root of the dazzling revolutionary implosion and collapse of socialism and central planning in the “socialist bloc” is what everyone concedes to be a disastrous economic failure. The peoples and the intellectuals of Eastern Europe and the Soviet Union are crying out not only for free speech, democratic assembly, and glasnost, but also for private property and free markets. And yet, if I may be pardoned a moment of nostalgia, four-and-a-half-decades ago, when I entered graduate school, the economics Establishment of that era was closing the book on what had been for two decades the famed “socialist calculation debate.” And they had all decided, left, right, and center, that there was not a thing economically wrong with socialism: that socialism’s only problems, such as they might be, were political. Economically, socialism could work just as well as capitalism.

Mises and the Challenge of Calculation

Before Ludwig von Mises raised the calculation problem in his celebrated article in 1920,[1]  everyone, socialists and non-socialists alike, had long realized that socialism suffered from an incentive problem. If, for example, everyone under socialism were to receive an equal income, or, in another variant, everyone was supposed to produce “according to his ability” but receive “according to his needs,” then, to sum it up in the famous question: Who, under socialism, will take out the garbage? That is, what will be the incentive to do the grubby jobs, and, furthermore, to do them well? Or, to put it another way, what would be the incentive to work hard and be productive at any job?

The traditional socialist answer held that the socialist society would transform human nature, would purge it of selfishness, and remold it to create a New Socialist Man. That new man would be devoid of any selfish, or indeed any self-determined, goals; his only wish would be to work as hard and as eagerly as possible to achieve the goals and obey the orders of the socialist State. Throughout the history of socialism, socialist ultras, such as the early Lenin and Bukharin under “War Communism,” and later Mao Tse-tung and Che Guevara, have sought to replace material by so-called “moral” incentives. This notion was properly and wittily ridiculed by Alexander Gray as “the idea that the world may find its driving force in a Birthday Honours List (giving to the King, if necessary, 165 birthdays a year).”[2]  At any rate, the socialists soon found that voluntary methods could hardly yield them the New Socialist Man. But even the most determined and bloodthirsty methods could not avail to create this robotic New Socialist Man. And it is a testament to the spirit of freedom that cannot be extinguished in the human breast that the socialists continued to fail dismally, despite decades of systemic terror.

But the uniqueness and the crucial importance of Mises’s challenge to socialism is that it was totally unrelated to the well-known incentive problem. Mises in effect said: All right, suppose that the socialists have been able to create a mighty army of citizens all eager to do the bidding of their masters, the socialist planners. What exactly would those planners tell this army to do? How would they know what products to order their eager slaves to produce, at what stage of production, how much of the product at each stage, what techniques or raw materials to use in that production and how much of each, and where specifically to locate all this production? How would they know their costs, or what process of production is or is not efficient?

Mises demonstrated that, in any economy more complex than the Crusoe or primitive family level, the socialist planning board would simply not know what to do, or how to answer any of these vital questions. Developing the momentous concept of calculation, Mises pointed out that the planning board could not answer these questions because socialism would lack the indispensable tool that private entrepreneurs use to appraise and calculate: the existence of a market in the means of production, a market that brings about money prices based on genuine profit-seeking exchanges by private owners of these means of production. Since the very essence of socialism is collective ownership of the means of production, the planning board would not be able to plan, or to make any sort of rational economic decisions. Its decisions would necessarily be completely arbitrary and chaotic, and therefore the existence of a socialist planned economy is literally “impossible” (to use a term long ridiculed by Mises’s critics).

The Lange-Lerner Solution

In the course of intense discussion throughout the 1920s and 1930s, the socialist economists were honest enough to take Mises’s criticism seriously, and to throw in the towel on most traditional socialist programs: in particular, the original communist vision that workers, not needing such institutions as bourgeois money fetishism, would simply produce and place their products on some vast socialist heap, with everyone simply taking from that heap “according to his needs.”

The socialist economists also abandoned the Marxian variant that everyone should be paid according to the labor time embodied into his product. In contrast, what came to be known as the Lange-Lerner solution (or, less commonly but more accurately, the Lange-Lerner-Taylor solution), acclaimed by virtually all economists, asserted that the socialist planning board could easily resolve the calculation problem by ordering its various managers to fix accounting prices. Then, according to the contribution of Professor Fred M. Taylor, the central planning board could find the proper prices in much the same way as the capitalist market: trial and error. Thus, given a stock of consumer goods, if the accounting prices are set too low, there will be a shortage, and the planners will raise prices until the shortage disappears and the market is cleared. If, on the other hand, prices are set too high, there will be a surplus on the shelves, and the planners will lower the price, until the markets are cleared. The solution is simplicity itself![3]

In the course of his two-part article and subsequent book, Lange concocted what could only be called the Mythology of the Socialist Calculation Debate, a mythology which, aided and abetted by Joseph Schumpeter, was accepted by virtually all economists of whatever ideological stripe. It was this mythology I found handed down as the Orthodox Line when I entered Columbia University’s graduate school at the end of World War II – a line promulgated in lectures by no less an expert on the Soviet economy than Professor Abram Bergson, then at Columbia. In 1948, indeed, Professor Bergson was selected to hand down the Received Opinion on the subject by a committee of the American Economic Association, and Bergson interred the socialist calculation question with the Orthodox Line as its burial rite.[4]

The Lange-Bergson Orthodox Line went about as follows: Mises, in 1920, had done an inestimable service to socialism by raising the problem of economic calculation, a problem of which socialists had not generally been aware. Then Pareto and his Italian disciple Enrico Barone had shown that Mises’s charge, that socialist calculation was impossible, was incorrect, since the requisite number of supply, demand, and price equations existed under socialism as under a capitalist system. At that point, F.A. Hayek and Lionel Robbins, abandoning Mises’s extreme position, fell back on a second line of defense: that, while the calculation problem could be solved theoretically, in practice it would be too difficult. Thereby Hayek and Robbins fell back on a practical problem, or one of degree of efficiency rather than of a drastic difference in kind. But now, happily, the day has been saved for socialism, since Taylor-Lange-Lerner have shown that, by jettisoning utopian ideas of a money-less or price-less socialism, or of pricing according to a labor theory of value, the socialist planning board can solve these pesky equations simply by the good old capitalist method of trial and error.[5]

Bergson, attempting to be magisterial in his view of the debate, summed up Mises as contending that “without private ownership of, or (what comes to the same thing for Mises) a free market for the means of production, the rational evaluation of these goods for the purposes of calculating costs is ruled out…”

Bergson correctly adds that to put Mises’s point somewhat more sharply than is customary, let us imagine a Board of Supermen, with unlimited logical faculties, with a complete scale of values for the different consumers’ goods, and present and future consumption, and detailed knowledge of production techniques. Even such a Board would be unable to evaluate rationally the means of production. In the absence of a free market for these goods, decisions on resource allocation in Mises’ view necessarily would be on a haphazard basis.

Bergson sharply comments that this “argument is easily disposed of.” Lange and Schumpeter both point out that, as Pareto and Barone had shown, once tastes and techniques are given, the values of the means of production can be determined unambiguously by imputation without the intervention of a market process. The Board of Supermen could decide readily how to allocate resources so as to assure the optimum welfare. It would simply have to solve the equations of Pareto and Barone.[6]

So much for Mises. As for the Hayek-Robbins problem of practicality, Bergson adds, that can be settled by the Lange-Taylor trial-and-error method; any remaining problems are only a matter of degree of efficiency, and political choices. The Mises problem has been satisfactorily solved.

Some Fallacies of the Lange-Lerner Solution

The breathtaking naïveté of the Orthodox Line should have been evident even in the 1940s. As Hayek later chided Schumpeter on the assumption of “imputation” outside the market, this formulation “presumably means … that the valuation of the factors of production is implied in, or follows necessarily from, the valuation of consumers’ goods. But … implication is a logical relationship which can be meaningfully asserted only of propositions simultaneously present to one and the same mind.”[7]

Economists were convinced of the Lange solution because they had already come under the sway of the Walrasian general equilibrium model; Schumpeter, for example, was an ardent Walrasian. In this model, the economy is always in static general equilibrium, a changeless world in which all “data”  – tastes or value scales, alternative technologies, and lists of resources – are known to everyone, and where costs are known and always equal to price. The Walrasian world is also one of “perfect” competition, where prices are given to all managers. Indeed, both Taylor and Lange make the point that the socialist planning board will be better able to calculate than capitalist markets, since the socialist planners can ensure “perfect competition,” whereas the real world of capitalism is shot through with various sorts of “monopolies”! The socialist planners can act like the absurdly fictional Walrasian “auctioneer,” bringing about equilibrium rapidly by trial and error.

Set aside the obvious absurdity of trusting a coercive governmental monopoly to act somehow as if it were in “perfect competition” with parts of itself. Another grievous flaw in the Lange model is thinking that general equilibrium, a world of certainty where there is no room for the driving force of entrepreneurship, can somehow be used to depict the real world. The actual world is one not of changeless “givens” but of incessant change and systemic uncertainty. Because of this uncertainty, the capitalist entrepreneur, who stakes assets and resources in attempting to achieve profits and avoid losses, becomes the crucial actor in the economic system, an actor who can in no way be portrayed by a world of general equilibrium. Furthermore, it is ludicrous, as Hayek pointed out, to think of general equilibrium as the only legitimate “theory,” with all other areas or problems dismissed as mere matters of practicality and degree. No economic theory worth its salt can be worthwhile if it omits the role of the entrepreneur in an uncertain world. The Pareto-Barone-Lange, etc. “equations” is not simply excellent theory that faces problems in practice; for in order to be “good,” a theory must be useful in explaining real life.[8]

Another grave flaw in the Lange-Taylor trial-and-error approach is that it concentrates on consumer goods pricing. It is true that retailers, given the stock of a certain type of good, can clear the market by adjusting the prices of that good upward or downward. But, as Mises pointed out in his original 1920 article, consumers’ goods are not the real problem. Consumers, these “market socialists” are postulating, are free to express their values by using money they had earned on a range of consumers’ goods. Even the labor market – at least in principle[9]  – can be treated as a market with self-owning suppliers who are free to accept or reject bids for their labor and to move to different occupations. The real problem, as Mises has insisted from the beginning, is in all the intermediate markets for land and capital goods. Producers have to use land and capital resources to decide what the stocks of the various consumer goods should be. Here there are a huge number of markets where the State monopoly can only be both buyer and seller for each transaction, and these intra-monopoly, intra-state transactions permeate the most vital markets of an advanced economy – the complex lattice-work of the capital markets. And here is precisely where calculational chaos necessarily reigns, and there is no way for rationality to intrude on the immense number of decisions on the allocation of prices and factors of production in the structure of capital goods.

Mises’s Rebuttal: The Entrepreneur

Moreover, Mises’s brilliant and devastating rebuttal to his Lange-Lerner-“market socialism” critics has virtually never been considered – neither by the economics establishment nor by the post–World War II Hayekians. In both cases, the writers were eager to dispose of Mises as having safely made his pioneering contribution in 1920, but being superseded later, either by Lange-Lerner or by Hayek, as the case may be. In both cases, it was inconvenient to ponder that Mises continued to elaborate his position with a penetrating critique of his critics, or that Mises’s “extreme” formulation may, after all, have been correct.[10]

Mises began his rebuttal in Human Action by discussing the “trial-and-error” method, and pointing out that this process only works in the capitalist market. There the entrepreneurs are strongly motivated to make greater profits and to avoid losses, and further, such a criterion does not apply to the capital goods or land market under socialism where all resources are controlled by one entity, the government.

Continuing his reply, Mises pressed on to a brilliant critique, not only of socialism, but of the entire Walrasian general equilibrium model. The major fallacy of the “market socialists,” Mises pointed out, is that they look at the economic problem from the point of view of the manager of the individual firm, who seeks to make profits or avoid losses within a rigid framework of a given, external allocation of capital to each of the various branches of industry and indeed to the firm itself. In other words, the “market socialist” manager is akin, not to the real driving force of the capitalist market, the capitalist entrepreneur, but rather to the relatively economically insignificant manager of the corporate firm under capitalism. As Mises brilliantly puts it:

the cardinal fallacy implied in [market socialist] proposals is that they look at the economic problem from the perspective of the subaltern clerk whose intellectual horizon does not extend beyond subordinate tasks. They consider the structure of industrial production and the allocation of capital to the various branches and production aggregates as rigid, and do not take into account the necessity of altering this structure in order to adjust it to changes in conditions…. They fail to realize that the operations of the corporate officers consist merely in the loyal execution of the tasks entrusted to them by their bosses, the shareholders…. The operations of the managers, their buying and selling, are only a small segment of the totality of market operations. The market of the capitalist society also performs those operations which allocate the capital goods to the various branches of industry. The entrepreneurs and capitalists establish corporations and other firms, enlarge or reduce their size, dissolve them or merge them with other enterprises; they buy and sell the shares and bonds of already existing and of new corporations; they grant, withdraw, and recover credits; in short they perform all those acts the totality of which is called the capital and money market. It is these financial transactions of promoters and speculators that direct production into those channels in which it satisfies the most urgent wants of the consumers in the best possible way.[11]

Mises goes on to remind the reader that the corporate manager performs only a “managerial function,” a subsidiary service that “can never become a substitute for the entrepreneurial function.” Who are the capitalist-entrepreneurs? They are “the speculators, promoters, investors and moneylenders, [who] in determining the structure of the stock and commodity exchanges and of the money market, circumscribe the orbit within which definite tasks can be entrusted to the manager’s discretion.” The crucial question, Mises continues, is not managerial activities, but: “In which branches should production be increased or restricted, in which branches should the objective of production be altered, what new branches should be inaugurated?” In short, the crucial decisions in the capitalist economy are the allocation of capital to firms and industries. “With regard to these issues,” Mises adds, “it is vain to cite the honest corporation manager and his well-tried efficiency. Those who confuse entrepreneurship and management close their eyes to the economic problem … The capitalist system is not a managerial system; it is an entrepreneurial system.”

But here, Mises triumphantly concludes, no “market socialist” has ever suggested preserving or carrying over, much less understood the importance of, the specifically entrepreneurial functions of capitalism:

Nobody has ever suggested that the socialist commonwealth could invite the promoters and speculators to continue their speculations and then deliver their profits to the common chest. Those suggesting a quasi-market for the socialist system have never wanted to preserve the stock and commodity exchanges, the trading in futures, and the bankers and money-lenders as quasi-institutions.[12]

Mises has been cited as stating, in Human Action, that it is absurd for the socialist planning board to tell their managers to “play market,” to act as if they are owners of their firms in trying to maximize profits and avoid losses. But it is important to stress that Mises was focusing, not so much on the individual managers of socialist “firms,” but on the speculators and investors who decide the crucial allocations of capital throughout the structure of industry. It is at least conceivable that one can order a manager to play market and act as if he were enjoying the profits and suffering losses; but it is clearly ludicrous to ask investors and capital speculators to act as if their fortunes were at stake. As Mises adds:

one cannot play speculation and investment. The speculators and investors expose their own wealth, their own destiny. This fact makes them responsible to the consumers, the ultimate bosses of the capitalist economy. If one relieves them of this responsibility, one deprives them of their very character.[13]

One time, during Mises’s seminar at New York University, I asked him whether, considering the broad spectrum of economies from a purely free market economy to pure totalitarianism, he could single out one criterion according to which he could say that an economy was essentially “socialist” or whether it was a market economy. Somewhat to my surprise, he replied readily: “Yes, the key is whether the economy has a stock market.” That is, if the economy has a full-scale market in titles to land and capital goods. In short: Is the allocation of capital basically determined by government or by private owners? At the time, I did not fully understand the vital importance of Mises’s answer, which I realized recently when poring over the great merits of the Misesian, as compared to the Hayekian, analysis of the socialist calculation problem.

For Mises, in short, the key to the capitalist market economy and its successful functioning is the entrepreneurial forecasting and decision-making of private owners and investors. The key is emphatically not the more minor decisions made by corporate managers within a framework already set by entrepreneurs and the capital markets. And it is obvious that Lange, Lerner, and the other market socialists merely envisioned the relatively lesser managerial decisions. These economists, who had never grasped the function of speculation or capital markets, therefore had no idea that they would need to be or could be replicated in a socialist system.[14]  And this is not surprising, since in the Walrasian general micro-equilibrium model, there is no capital structure, there is no role for capital, and capital theory has become totally submerged into “growth theory,” that is, growth of a homogeneous “level,” or blob, of aggregate macro-capital. The allocation of capital is considered external and given, and receives no consideration.

The Structure of Capital

Joseph Schumpeter and Frank H. Knight are interesting examples of two eminent economists who were personally anti-socialist but were seduced by their Walrasian devotion to general equilibrium and their lack of a genuine capital theory into strongly endorsing the orthodox view that there is no economic calculation problem under socialism. In particular, in capital theory, both Schumpeter and Knight were disciples of J.B. Clark, who denied any role at all for time in the process of production. For Schumpeter, production takes no time because production and consumption are somehow always “synchronized.” Time is erased from the picture, even to assuming away the existence of any accumulated stocks of capital goods, and therefore of any age structure of such goods. Since production is magically synchronized, there is then no necessity for land or labor to receive advances in payment from capitalists out of accumulated savings. Schumpeter achieves this feat by sundering capital completely from its embodiment in capital goods, and limiting the concept to a money fund used to purchase such goods.[15]

Frank Knight, the doyen of the Chicago School, was also an ardent believer in the Clarkian view that time preference has no influence on interest paid by producers, and that production is synchronized so that time plays no role in the production structure. Hence, Knight believed, along with modern orthodoxy, that capital is a homogeneous, self-perpetuating blob that has nolattice-like, time-oriented structure. Knight’s fiercely anti–Böhm-Bawerkian, anti-Austrian views on capital and interest led him to a then-famous war of journal articles over capital theory during the 1930s, a war he won by default when Austrianism disappeared because of the Keynesian evolution.[16]

In his negative review of Mises’s Socialism, Frank Knight, after hailing Lange’s “excellent” 1936 article, brusquely dismisses the socialist calculation debate as “largely sound and fury.” To Knight, it is simply “truistical” that the “technical basis of economic life” would continue as before under socialism, and that therefore “the managers of various technical units in production – farms, factories, railways, stores, etc. – would carry on in essentially the same way.” Note, there is no reference whatever to the crucial capital market, or to the allocation of capital to various branches of production. If capital is an automatically renewing homogeneous blob, all one need worry about is growth in the amount of that blob. Hence, Knight concludes that “socialism is a political problem, to be discussed in terms of social and political psychology, and economic theory has relatively little to say about it.”[17]  Certainly, that is true of Knight’s orthodox-Chicagoite brand of economic theory!

It is instructive to compare the naïveté and the brusque dismissal of the problem by Schumpeter and Knight with the penetrating Misesian critique of socialism by Professor Georg Halm:

Because capital is no longer owned by many private persons, but by the community, which itself disposes of it directly, a rate of interest can no longer be determined. A pricing process is always possible only when demand and supply meet in a market…. In the socialist economy … there can be no demand and no supply when the capital from the outset is in the possession of its intending user, in this case the socialistic central authority.

Now it might perhaps be suggested that, since the rate of interest cannot be determined automatically, it should be fixed by the central authority. But this likewise would be quite impossible. It is true that the central authority would know quite well how many capital goods of a given kind it possessed or could procure…; it would know the capacity of the existing plant in the various branches of production; but it would not know how scarce capital was. For the scarcity of means of production must always be related to the demand for them, whose fluctuations give rise to variations in the value of the good in question…

If it should be objected that a price for consumption-goods would be established, and that in consequence the intensity of the demand and so the value of the means of production would be determinate, this would be a further serious mistake…. The demand for means of production, labor and capital goods, is only indirect.

Halm goes on to add that if there were only one single factor of production in making consumers’ goods, the socialist “market” might be able to determine its proper price. But this can not be true in the real world where several factors of production take part in the production of goods in various markets.

Halm then adds that the central authority, contrary to his above concession, would not even be able to find out how much capital it is employing. For capital goods are heterogeneous, and therefore how “can the total plant of one factory be compared with that of another? How can a comparison be made between the values of even only two capital-goods?” In short, while under capitalism such comparisons can be made by means of money prices set on the market for every good, in the socialist economy the absence of genuine money prices arising out of a market precludes any such value comparisons. Hence, there is also no way for a socialist system to rationally estimate the costs (which are dependent on prices in factor markets) of any process of production.[18]

Mises’s Rebuttal: Valuation and Monetary Appraisement

In his original 1920 article, Mises emphasized that “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.” Mises then states, prophetically:

One may anticipate the nature of the future socialist society. There will be hundreds and thousands of factories in operation. Very few of these will be producing wares ready for use; in the majority of cases what will be manufactured will be unfinished goods and production goods. All these concerns will be interrelated. 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? At best it will only be able to compare the quality and quantity of the consumable end-product produced, but will in the rarest cases be in a position to compare the expenses entailed in production.

Mises points out that while the government may be able to know what ends it is trying to achieve, and what goods are most urgently needed, it will have no way of knowing the other crucial element required for rational economic calculation: valuation of the various means of production, which the capitalist market can achieve by the determination of money prices for all products and their factors.[19]

Mises concludes that, in the socialist economy “in place of the economy of the ‘anarchic’ method of production, recourse will be had to the senseless output of an absurd apparatus. The wheels will turn, but will run to no effect.”[20]

Moreover, in his later rebuttal to the champions of the Pareto-Barone equations, Mises points out that the crucial problem is not simply that the economy is not and can never be in the general equilibrium state described by these differential equations. In addition to other grave problems with the equilibrium model (e.g.: that the socialist planners do not now know their value scales in future equilibrium; that money and monetary exchange cannot fit into the model; that units of productive factors are neither perfectly divisible nor infinitesimal – and that marginal utilities, of different people cannot be equated – on the market or anywhere else), the equations “do not provide any information about the human actions by means of which the hypothetical state of equilibrium” has been or can be reached. In short, the equations offer no information whatever on how to get from the existing disequilibrium state to the general equilibrium goal.

In particular, Mises points out, “even if, for the sake of argument, we assume that a miraculous inspiration has enabled the director without economic calculation to solve all problems concerning the most advantageous arrangement of all production activities and that the price image of the final goal he must aim at is present to his mind,” there remain crucial problems on the path from here to there. For the socialist planner does not start from scratch and then build a capital goods structure most perfectly designed to meet his goals. He necessarily starts with a capital goods structure produced at many stages of the past and determined by past consumer values and past technological methods of production. There are different degrees of such past determinants built into the existing capital structure, and anyone starting today must use these resources as best he can to meet present and expected future goals. For these heterogeneous choices, no mathematical equations can be of the slightest use.[21]

Finally, the unique root of Mises’s position, and one that distinguishes him and his “socialist impossibility” thesis from Hayek and the Hayekians, has been neglected until the present day. And this neglect has persisted despite Mises’s own explicit avowal in his memoirs of the root, and groundwork of his calculation thesis.[22]  For Mises was not, like Hayek and his followers, concentrating on the flaws in the general equilibrium model when he arrived at his position; nor was he led to his discussion solely by the triumph of the socialist revolution in the Soviet Union.

For Mises records that his position on socialist calculation emerged out of his first great work, The Theory of Money and Credit (1912). In the course of that notable integration of monetary theory and “micro” marginal utility theory, Mises was one of the very first to realize that subjective valuations of the consumers (and of laborers) on the market are purely ordinal, and are in no way measurable. But market prices are cardinal and measurable in terms of money, and market money prices bring goods into cardinal comparability and calculation (e.g., a $10 hat is “worth” five times as much as a $2 loaf of bread).[23]  But Mises realized that this insight meant it was absurd to say (as Schumpeter would) that the market “imputes” the values of consumer goods back to the factors of production. Values are not directly “imputed”; the imputation process works only indirectly, by means of money prices on the market. Therefore socialism, necessarily devoid of a market in land and capital goods, must lack the ability to calculate and compare goods and services, and therefore any rational allocation of productive resources under socialism is indeed impossible.[24]

For Mises, then, his work on socialist calculation was part and parcel of his expanded integration of direct and monetary exchange – of “micro” and “macro” – that he had begun but not yet completed in The Theory of Money and Credit.[25]

Fallacies of Hayek and Kirzner

The orthodox line of the 1930s and ’40s was wrong in claiming that Hayek and his followers (such as Lionel Robbins) abandoned Mises’s “theoretical” approach by bowing down to the Pareto-Barone equations, falling back on “practical” objections to socialist planning.[26]  As we have already seen, Hayek scarcely ceded to mathematical equations of general equilibrium the monopoly of correct economic theory. But it is also true that Hayek and his followers fatally and radically changed the entire focus of their “Austrian” position, either by misconstruing Mises’s argument or by consciously though silently shifting the crucial terms of the debate.

It is no accident, in short, that Hayek and the Hayekians dropped Mises’s term “impossible” as embarrassingly extreme and imprecise. For Hayek, the major problem for the socialist planning board is its lack of knowledge. Without a market, the socialist planning board has no means of knowing the value-scales of the consumers, or the supply of resources or available technologies. The capitalist economy is, for Hayek, a valuable means of disseminating knowledge from one individual to another through the pricing “signals” of the free market. A static, general equilibrium economy would be able to overcome the Hayekian problem of dispersed knowledge, since eventually all data would come to be known by all, but the ever-changing, uncertain data of the real world prevents the socialist planning board from acquiring such knowledge. Hence, as is usual for Hayek, the argument for the free economy and against statism rests on an argument from ignorance.

But to Mises the central problem is not “knowledge.” He explicitly points out that even if the socialist planners knew perfectly, and eagerly wished to satisfy, the value priorities of the consumers, and even if the planners enjoyed a perfect knowledge of all resources and all technologies, they still would not be able to calculate, for lack of a price system of the means of production. The problem is not knowledge, then, but calculability. As Professor Salerno points out, the knowledge conveyed by present – or immediate “past” – prices is consumer valuations, technologies, supplies, etc. of the immediate or recent past. But what acting man is interested in, in committing resources into production and sale, is future prices, and the present committing of resources is accomplished by the entrepreneur, whose function is to appraise – to anticipate – future prices, and to allocate resources accordingly. It is precisely this central and vital role of the appraising entrepreneur, driven by the quest for profits and the avoidance of losses, that cannot be fulfilled by the socialist planning board, for lack of a market in the means of production. Without such a market, there are no genuine money prices and therefore no means for the entrepreneur to calculate and appraise in cardinal monetary terms.

More philosophically, the entire Hayekian emphasis on “knowledge” is misplaced and misconceived. The purpose of human action is not to “know” but to employ means to satisfy goals. As Salerno perceptively summarizes Mises’s position:

The price system is not – and praxeologically cannot be – a mechanism for economizing and communicating the knowledge relevant to production plans [the Hayekian position]. The realized prices of history are an accessory of appraisement, the mental operation in which the faculty of understanding is used to assess the quantitative structure of price relationships which corresponds to an anticipated constellation of economic data. Nor are anticipated future prices tools of knowledge; they are instruments of economic calculation. And economic calculation itself is not the means of acquiring knowledge, but the very prerequisite of rational action within the setting of the social division of labor. It provides individuals, whatever their endowment of knowledge, the indispensable tool for attaining a mental grasp and comparison of the means and ends of social action.[27]

In a recent article, Professor Israel Kirzner argues for the Hayekian position. For Hayek and for Kirzner, the market is a “discovery procedure,” that is, an unfolding of knowledge. There is, in this view of the market and of the world, no genuine recognition of the entrepreneur, not as a “discoverer,” but as a dynamic risk taker, risking losses if his appraisal and forecast go awry. Kirzner’s commitment to the “discovery process” fits all too well with his own original concept of the entrepreneurial function as being that of “alertness,” and of different entrepreneurs as being variously alert to the opportunities that they see and discover. But this outlook totally misconceives the role of the entrepreneur. The entrepreneur is not simply “alert”; he forecasts; he appraises; he meets and bears risk and uncertainty by questing for profits and risking losses. As Salerno points out, for all their talk of dynamism and uncertainty, the Hayek-Kirzner “entrepreneur” is curiously bloodless and passive, receiving and passively imbibing knowledge imparted to him by the market. The Hayek-Kirzner entrepreneur is far closer than they like to think to theWalrasian automaton – to the fictional “auctioneer” who avoids all real trades in the marketplace.[28]

Unfortunately, while lucidly expounding the Hayekian position, Kirzner obfuscates the history of the debate by claiming that the later Mises, along with Hayek, changed his position (or, at the least, “elaborated” it) from his original, “static” view of 1920. But on the contrary, as Salerno points out, the “later” Mises explicitly spurned uncertainty of the future as the key to the calculation problem. The key to the calculation question, stated Mises in Human Action, is not that “all human action points to the future and the future is always uncertain.” No, socialism has

quite a different problem. Today we calculate from the point of view of our present knowledge and of our present anticipation of future conditions. We do not deal with the problem of whether or not the [socialist] director will be able to anticipate future conditions. What we have in mind is that the director cannot calculate from the point of view of his own present value judgments and his own present anticipation of future conditions, whatever they may be. If he invests today in the canning industry, it may happen that a change in consumers’ tastes or in the hygienic opinions concerning the wholesomeness of canned food will one day turn his investment into a malinvestment. But how can he find out today how to build and equip a cannery most economically?

Some railroad lines constructed at the turn of the century would not have been built if the people had at that time anticipated the impending advance of motoring and aviation. But those who at the time built railroads knew which of the various possible alternatives for the realization of their plans they had to choose from the point of view of their appraisements and anticipations and of the market prices of their day in which the valuations of the consumers were reflected. It is precisely this insight that the director will lack. He will be like a sailor on the high seas unfamiliar with the methods of navigation…[29][30]

Solving Equations and Lange’s Last Word

One of the unfortunate formulations of Hayek and the Hayekians in the 1930s, giving rise to the general misunderstanding that the only problems of socialist planning are “practical” not “theoretical,” was their stress on the alleged difficulty of socialist planners in computing or solving all the demand and supply functions, all the “simultaneous differential equations” needed to plan prices and the allocation of resources. If socialistic planning is to rely on the Pareto-Barone equations, then how will all of them be known, especially in a world of necessarily changing data of values, resources, and technology?

Lionel Robbins began this equation-difficulty approach in his study of the 1929 depression, The Great Depression. Conceding, with Mises, that the planners could determine consumer preferences by allowing a market in consumer goods, Robbins correctly added that the socialist planners would also have to “know the relative efficiencies of the factors of production in producing all the possible alternatives.” Robbins then unfortunately added:

On paper we can conceive this problem to be solved by a series of mathematical calculations. We can imagine tables to be drawn up expressing the consumers demands … And we can conceive technical information giving us the productivity … which could be produced by each of the various possible combinations of the factors of production. On such a basis a system of simultaneous equations could be constructed whose solution would show the equilibrium distribution of factors and the equilibrium production of commodities.

But in practice this solution is quite unworkable. It would necessitate the drawing up of millions of equations on the basis of millions of statistical tables based on many more millions of individual computations. By the time the equations were solved, the information on which they were based would have become obsolete and they would need to be calculated anew.[31]

While Robbins’s strictures about changes in data were and still are true enough, they helped divert the emphasis from Mises’s even-if-static and full-knowledge calculation approach, to Hayek’s emphasis on uncertainty and change. More important, they gave rise to the general myth that Robbins’s strictures against socialism, unlike Mises’s, were only “practical” in the sense of not being able to calculate all these simultaneous equations. Furthermore, in the concluding essay in his Collectivist Economic Planning, Hayek set forth all the reasons why the planners could not know essential data, one of which is that they would have to solve “hundreds of thousands” of unknowns. But

this means that, at each successive moment, every one of the decisions would have to be based on the solution of an equal number of simultaneous differential equations, a task which, with any of the means known at present, could not be carried out in a lifetime. And yet these decisions would … have to be made continuously…[32]

It is fascinating to note the twists and turns in Oskar Lange’s reaction to the equation-solving argument. In his 1936 article, which was long considered the last word on the subject, Lange ridiculed the very terms of the problem. Adopting his “quasi-market” socialist approach, and ignoring the crucial Misesian problem of the necessary absence of any market in land or capital, Lange simply stated that there is no need for planners to worry about these equations, since they would be “solved” by the socialist market:

Neither would the Central Planning Board have to solve hundreds of thousands … or millions … of equations. The only “equations” which would have to be “solved” would be those of the consumers and the managers of production plants. These are exactly the same “equations” which are solved in the present economic system and the persons who do the “solving” are the same also. Consumers … and managers … “solve” them by a method of trial and error… And only few of them have been graduated in higher mathematics. Professor Hayek and Professor Robbins themselves “solve” at least hundreds of equations daily, for instance, in buying a newspaper or in deciding to take a meal in a restaurant, and presumably they do not use determinants or Jacobians for that purpose.[33]

Thus, the orthodox neoclassical economic establishment had settled the calculation dispute with Lange-Lerner the acclaimed winner. Accordingly, when the end of World War II brought communism/socialism to his native Poland, Professor Oskar Lange left the plush confines of the University of Chicago to play a major role in bringing his theories to bear on the brave new world of socialist Poland. Lange became Polish ambassador to the United States, then Polish delegate to the United Nations Security Council, and finally chairman of the Polish Economic Council. And yet not once in this entire period or later, did Poland – or any other communist government, for that matter – attempt to put into practice anything remotely like Lange’s fictive accounting-type, play-at-market socialism. Instead, they all put into effect the good old Stalinist command-economy model.

It did not take long for Oskar Lange to adjust to the persistence of the Stalinist Model. Indeed, it turns out that Lange, in post-war Poland, argued strongly for the historical necessity of the persistence of the Stalinist model as opposed to his own market socialism. Arguing against his own quasi-decentralized market-socialist solution, Lange, in 1958, revealed that “in Poland, we had some discussions whether such a period of highly centralized planning and management was historical necessity or a great political mistake. Personally, I hold the view that it was a historical necessity.”

Why? Lange now claimed:

1. that the “very process of the social revolution which liquidates one social system and establishes another requires centralized disposal of resources by the new revolutionary state, and consequently centralized management and planning.”
2. second, in underdeveloped countries – and which socialist country was not underdeveloped? – “Socialist industrialization, and particularly very rapid industrialization, which was necessary in the first socialist countries, particularly in the Soviet Union … requires centralized disposal of resources.” Soon, however, Lange promised, the dialectic of history will require the socialist government to organize quasi-market, decentralized decision-making within the overall plan.[34]

Shortly before his death in 1965, however, Oskar Lange, in his neglected last word on the socialist calculation debate, implicitly revealed that his socialist-market “solution” had been little more than a hoax, to be jettisoned quickly when he indeed saw a way for the planning board to solve all those hundreds of thousands or millions of simultaneous equations! Strangely gone was his gibe that everyone “solves equations” every day without having to do so formally. Instead, technology had now supposedly come to the rescue of the planning board! As Lange put it:

Were I to rewrite my essay [“On the Economic Theory of Socialism”] today my task would be much simpler. My answer to Hayek and Robbins would be: so what’s the trouble? Let us put the simultaneous equations on an electronic computer and we shall obtain the solution in less than a second. The market process with its cumbersome tâtonnements appears old-fashioned. Indeed, it may be considered as a computing device of the pre-electronic age.[35]

Indeed, Lange claims that the computer is superior to the market, because the computer can perform long-range planning far better, since it somehow already knows “future shadow prices” which markets cannot seem to obtain.

Lange’s naïve enthusiasm for the magical planning qualities of the computer in its early days can only be considered a grisly joke to the economists and the people in the socialist countries who have seen their economies go inexorably from bad to far worse despite the use of computers. Lange apparently never became familiar with the computer adage, GIGO (“garbage in, garbage out”). Nor could he have become familiar with the recent estimate of a top Soviet economist that, even assuming that the planning board and its computers could learn the correct data, it would take even the current generation of computers 30,000 years to process the information and allocate the resources.[36]

But there is a more important flaw in Lange’s last article than his naïveté about the magical powers of the then-new technology of the computer. His eagerness to embrace a way of solving those equations he earlier had claimed didn’t need conscious solving demonstrates that he had been disingenuous in claiming that his pseudomarket trial-and-error method would provide a facile way for the socialist society to solve the calculation problem.

Socialist Impossibility and the Argument from Existence

Ever since 1917, or at least since Stalin’s great leap forward into socialism in the early 1930s, the defenders of the possibility of socialism against Mises’s strictures had one final, clinching, fallback argument. When all the arguments over general equilibrium or equations or entrepreneurship or Walrasian tâtonnements or the command economy or pseudo-markets had been hashed over, the defenders of socialism could simply fall back on one point: Well, socialism exists, doesn’t it? When all is said and done, it exists, and therefore it must be, for one reason or another, possible. Mises must clearly be wrong, even if the “practical” arguments of Hayek or Robbins, arguments of mere degrees of efficiency, need to be soberly considered. At the end of his celebrated survey essay on socialist economics Professor Abram Bergson put the point starkly:

there can hardly be any room for debate: of course, socialism can work. On this, Lange certainly is convincing. If this is the sole issue, however, one wonders whether at this stage such an elaborate theoretic demonstration is in order. After all, the Soviet planned economy has been operating for thirty years. Whatever else may be said of it, it has not broken down.[37]

In the first place, this triumphal conclusion now rings hollow, since the economies of the Soviet Union and the other socialist bloc countries have now manifestly broken down. And now it also turns out that the Soviet GNP and production figures that Bergson, the CIA, and other Sovietologists have been taking at face value for decades have been nothing but a pack of lies, designed to deceive not the United States, but the Soviet managers’ own ruling elite. Even now, Western Sovietologists are reluctant to believe the Soviet economists who are finally trying to tell them the truth about these alleged and much revered data.

But apart from all that, this sort of seemingly decisive empiricist counter to the Misesian critique reveals the perils of using allegedly simple and brute “facts” to rebut theory in the sciences of human action. For why must we assume that the Soviet Union and the Eastern European countries ever really enjoyed full and complete socialism? There are many reasons to believe that, try as they might, the communist rulers were never able to impose total socialism and central planning. For one thing, it is now known that the entire Soviet economy and society has been shot through with a vast network of black markets and evasions of controls, fueled by a pervasive system of bribery known as blat to allow escape from those controls. Managers who could not meet their annual production quotas were approached by illegal entrepreneurs and labor teams to help them meet the quotas and get paid off the books. And black markets in foreign exchange have long been familiar to every tourist. Long before the Eastern European collapse of communism, these countries stopped trying to stamp out their black markets in hard currency, even though they were blatantly visible in the streets of Warsaw, Budapest, and Prague. Without uncontrolled black markets fueled by bribery, the communist economies may well have collapsed long ago.[38]  This historical point has also been bolstered by Michael Polanyi’s “span of control” theory, which denies the possibility of effective central planning from a rather different viewpoint than Mises’s.[39]

But the decisive rebuttal has, once again, been leveled by Mises in Human Action: the Soviet Union and Eastern European economies were not fully socialist because they were, after all, islands in a world capitalist market. The communist planners were therefore able, albeit clumsily and imperfectly, to use prices set by world markets as indispensable guidelines for the pricing and allocation of capital resources. As Mises pointed out:

People did not realize that these were not isolated social systems. They were operating in an environment in which the price system still worked. They could resort to economic calculation on the ground of the prices established abroad. Without the aid of these prices their actions would have been aimless and planless. Only because they were able to refer to these foreign prices were they able to calculate, to keep books, and to prepare their much talked about plans.[40]

Mises’s insight was confirmed as early as the mid-1950s, when the British economist Peter Wiles visited Poland, where Oskar Lange was helping to plan Polish socialism. Wiles asked the Polish economists how they planned the economic system. As Wiles reported:

What actually happens is that “world prices”, i.e. capitalist world prices, are used in all intra-[Soviet] bloc trade. They are translated into rubles … entered into bilateral clearing accounts.

Wiles then asked the Polish communist planners the crucial question. Since the Poles were, as good Marxist-Leninists, presumably committed to the triumph, as soon as possible, of world-wide socialism, Wiles asked: “What would you do if there were no capitalist world” from which you could obtain all those crucial prices? The Polish planners’ rather cynical answer: “We’ll cross that bridge when we come to it.” Wiles added that “In the case of electricity the bridge is already under their feet: there has been great difficulty in pricing it since there is no world market.”[41]

But fortunately for the world and for the Polish planners themselves, they were never truly forced to cross that bridge.

Epilogue: The End of Socialism and Mises’s Statue

In his supposedly definitive article of 1936 vindicating economic calculation under socialism, Oskar Lange delivered a once-famous gibe at Ludwig von Mises. Lange began his essay by ironically hailing Mises’s services to socialism: “Socialists have certainly good reason to be grateful to Professor Mises, the great advocatus diaboli of their cause. For it was his powerful challenge that forced the socialists to recognize the importance of an adequate system of economic accounting … the merit of having caused the socialists to approach this problem systematically belongs entirely to Professor Mises.” Lange then went on to taunt Mises:

Both as an expression of recognition for the great service rendered by him and as a memento of the prime importance of sound economic accounting, a statue of Professor Mises ought to occupy an honorable place in the great hall of the Ministry of Socialization or of the Central Planning Board of the socialist state.

Lange went on to say that “I am afraid that Professor Mises would scarcely enjoy what seemed the only adequate way to repay the debt of recognition incurred by the socialists … ” For one thing, Lange concluded, to complete Mises’s discomfiture

a socialist teacher might invite his students in a class on dialectical materialism to go and look at the statue, in order to exemplify the Hegelian List der Vernuft[cunning of Reason] which made even the staunchest of bourgeois economists unwittingly serve the proletarian cause.[42]

Curiously enough, Lange, during his years as socialist planner in Poland, never got around to erecting the statue to Mises at the Ministry of Socialization in Warsaw. Perhaps socialist planning was not successful enough to accord Mises that honor – or perhaps there were not enough resources to build the statue. In any case, the opportunity has been lost. The countries of Eastern Europe now stand in the rubble wrought by what used to be called in the 1930s “the great socialist experiment.” Emerging gloriously out of the rubble of the collapse of socialism are a myriad of Misesian economists, to whom socialism is little more than a grisly joke. Even as early as the 1960s it was a common quip among economists that, at international economic conferences, “the Western economists talk about the glories of planning while the Eastern economists talk about the virtues of the free market.” Now Misesian economists are springing out of the ruins of socialism in Poland, Lithuania, Czechoslovakia, Hungary, Yugoslavia (especially Croatia and Slovenia) and the Soviet Union. Neither socialist planning nor Marxism-Leninism hold any charms for the economists of the once-socialist nations.

In all of these countries, the giant statues of Lenin are being unceremoniously toppled from the public squares. Whether or not the coming free societies of Eastern Europe choose to replace them with statues of Ludwig von Mises, as the prophet of their liberation, one thing seems certain: there will be no statues erected to Oskar Lange in Cracow or Warsaw. It is hard to see how even the cunning of Reason and the Hegelian dialectic can make Lange out to be a prophet or an important contributor to the laissez-faire Polish economy of the future. Perhaps the closet approach was a bitter quip pervading Eastern Europe during the revolutionary year of 1989: “Communism can be defined as the longest route from capitalism to capitalism.”

Notes

[1]  Mises’s article, published in 1920 in German, “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen,” was only made available in English in 1935: Mises, “Economic Calculation in the Socialist Commonwealth,” in F. A. Hayek, ed., Collectivist Economic Planning (London: Routledge and Sons, 1935), pp. 87–130. The article was republished as a monograph by the Mises Institute with a notable postscript by Professor Joseph T. Salerno (Ludwig von Mises, Economic Calculation in the Socialist Commonwealth [Auburn, Ma.: Ludwig von Mises Institute, 1990]).

[2]  Alexander Gray, The Socialist Tradition (London: Longmans, Green, 1946), p. 90.

[3]  Oskar Lange’s well-known article was originally in two parts: “On the Economic Theory of Socialism,” Review of Economic Studies 4 (October 1936): 53–71, and ibid. 5 (February 1937): 132–42; Fred M. Taylor’s article was “The Guidance of Production in a Socialist State,” American Economic Review 19 (March 1929); Taylor was reprinted and Lange revised and published in Oskar Lange and Fred M. Taylor, On the Economic Theory of Socialism, B. Lippincott, ed. (Minneapolis: University of Minnesota Press, 1938).

[4]  Abram Bergson, “Socialist Economics,” in H.S. Ellls, ed., A Survey of Contemporary Economics (Philadelphia: Blakiston, 1948), pp. 412–48.

[5]  Lange was aided in this construction by being able to use Hayek’s collection of articles on the subject, which had just been published the year before his first article, as a useful foil. Hayek’s volume included the seminal article by Mises, other contributions by Pierson and Halm, two articles by Hayek himself, and the alleged refutation of Mises by Barone. See Hayek, Collectivist Economic Planning.

[6]  Bergson, “Socialist Economics,” p. 446.

[7]  F.A. Hayek, “The Use of Knowledge in Society” (1945), in Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948), p. 90.

[8]  The silliness of hailing Barone’s essay as a refutation of Mises is highlighted by the fact that Barone’s article was published in 1908, twelve years before Mises’s article which it is supposed to have refuted. The data was well known to, and made no impression upon, Ludwig von Mises. Moreover, Barone and Pareto themselves had only scorn for any notion that their equations could aid socialist planning. See Trygve J. B. Hoff, Economic Calculation in the Socialist Society (1949; Indianapolis, Ind.: Liberty Press, 1981), pp. 222–23.

[9]  Here, as in other parts of his argument – as we shall see further below – Mises is leaning over backward to concede the market socialists their best case, and is not considering whether such free consumer or labor markets are really likely in a world where the state is the only seller, as well as the only purchaser, of labor.

[10]  Mises’s later rebuttal is in his Human Action (New Haven: Yale University Press, 1949), pp. 694–711. For the establishment, the debate was supposed to be over by 1938. For an example of a Hayekian survey of the debate that does not bother to so much as mention Human Action, see Karen I. Vaughn, “Introduction,” in Hoff, Economic Calculation, pp. ix-xxxvii. Indeed, in an earlier paper, Vaughn had sneered that “Mises’ so-called final refutation in Human Action is mostly polemic and glosses over the real problems….” Vaughn, “Critical Discussion of the Four Papers,” in Lawrence Moss, ed. The Economics of Ludwig von Mises (Kansas City: Sheed and Ward, 1976), p. 107. The Hayekian doctrine will be treated further below.

For a refreshing example of an outstanding Misesian contribution to the debate that does not neglect or deprecate Human Action but rather builds upon it, see Joseph T. Salerno, “Ludwig von Mises as Social Rationalist,” Review of Austrian Economics 4 (1990): 36–48. Also see Salerno, “Why Socialist Economy is Impossible,” a Postscript to Mises, Economic Calculation in the Socialist Commonwealth (Auburn, Ala.: Ludwig von Mises Institute, 1990).

[11]  Mises, Human Action, pp. 703–04.

[12]  Ibid., pp. 704–05.

[13]  Ibid., p. 705.

[14]  The fact that some socialist bloc countries, such as Hungary, now permit a stock market, albeit small and truncated, and that other ex-communist countries are seriously considering introducing such capital markets, demonstrates the enormous importance of the de-socialization now under way in Eastern Europe.

[15]  See Murray N. Rothbard, “Breaking Out of the Walrasian Box: The Cases of Schumpeter and Hansen,” Review of Austrian Economics 1 (1987): 98–100, 107. (Available in PDF.)

[16]  On Knight vs. Hayek, Machlup, and Boulding in the 1930s. see F. A. Hayek, “The Mythology of Capital,” in W. Fellner and B. Haley, eds., Readings in the Theory of lncome Distribution (Philadelphia: Blakiston, 1946), pp. 355–83. For a Knightian attack on the Austrian discounted marginal productivity theory on behalf of what is now the orthodox undiscounted (by time-preference) marginal productivity theory, see Earl Rolph, “The Discounted Marginal Productivity Doctrine,” ibid., pp. 278–93. For an Austrian rebuttal, see Murray N. Rothbard, Man, Economy, and State, vol. 1 (Los Angeles: Nash, 1970), pp. 431–33; and Walter Block, “The DMVP-MVP Controversy: A Note,” Review of Austrian Economics 4 (1990): 199–207. (Available in PDF.)

[17]  “Frank H. Knight, “Review of Ludwig von Mises, Socialism,” Journal of Political Economy 46 (April 1938): 267–68. In another review in the same issue of the journal, Knight claims that there would be a “capital market” under socialism, but it is clear that he is referring only to a market for loans, and not to a genuine market in equities throughout the production structure. Here again, Mises has a devastating critique of this sort of scheme in Human Action, pointing out that managers bidding for governmental planning board funds would not be bidding for or staking their own property, and hence they would “not be restrained by any financial dangers they themselves run in promising too high a rate of interest for the funds borrowed…. All the hazards of this insecurity fall only upon society, the exclusive owner of all resources available. If the director were without hesitation to allocate the funds available to those who bid most, he would simply … abdicate in favor of the least scrupulous visionaries and scoundrels.” See Knight, “Two Economists on Socialism,” Journal of Political Economy 46 (April 1938): 248; and Mises, Human Action, p. 705.

[18]  Georg Halm, “Further Considerations on the Possibility of Adequate Calculation in a Socialist Community,” in Hayek, Collectivist Economic Planning, pp. 162–65. Also see ibid., pp. 13–200.

[19]  Mises, “Economic Calculation in the Socialist Commonwealth,” pp. 106–08.

[20]  Ibid., p. 106. This conclusion of 1920 is strikingly close to the quip common in the Poland of 1989, as reported by Professor Krzyztof Ostazewski of the University of Louisville: that the socialist planned economy is “a value-shredding machine run by an imbecile.”

[21]  Mises, Human Action, pp. 706–09: As Mises puts it: “socialists of all shades of opinion, repeat again and again that what makes the achievement of their ambitious plans realizable is the enormous wealth hitherto accumulated. But in the same breath, they disregard the fact that this wealth consists to a great extent in capital goods produced in the past and more or less antiquated from the point of view of our present valuations and technologica1 knowledge.” Ibid. p. 710.

[22]  In Mises’s Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 112. Also see the discussion in Murray N. Rothbard, Ludwig von Mises: Scholar, Creator, Hero (Auburn, Ala.: Ludwig von Mises Institute, 1988), pp. 35–38.

[23]  On the market, then, consumers evaluate goods and services ordinally, whereas entrepreneurs appraise (estimate and forecast future prices) cardinally. On valuation and appraisement, see Mises, Human Action, pp. 327–330; Salerno, “Mises as Social Rationalist,” pp. 39–49; and Salerno, “Socialist Economy is Impossible.”

[24]  Mises says in his memoirs: “They [the socialists] failed to see the very first challenge: How can economic action that always consists of preferring and setting aside, that is, of making unequal valuations, be transformed into equal valuations, by the use of equations? Thus the advocates of socialism came up with the absurd recommendation of substituting equations of mathematical catallactics, depicting an image from which human action is eliminated, for the monetary calculation in the market economy.” Mises, Notes and Recollections, p. 112.

[25]  This integration was later completed by his business-cycle theory in the 1920s, and then in his monumental treatise Human Action.

[26]  Except for the unfortunate emphasis of Hayek and Robbins on the alleged socialist difficulty of computing or “counting” the equations. See below.

[27]  Salerno, “Mises as Social Rationalist,” p. 44.

[28]  Israel M. Kirzner, “The Economic Calculation Debate: Lessons for Austrians,” Review of Austrian Economics 2 (1988): 1–18 [PDF]. Hayek coined the term “discovery procedure” in F. A. Hayek, “Competition as a Discovery Procedure,” in New Studies in Philosophy, Politics, Economics and the History of Ideas (Chicago: University of Chicago Press, 1978), pp. 179–90. For a critique of Kirzner’s concept of entrepreneurship, see Murray N. Rothbard, “Professor Hébert on Entrepreneurship,” Journal of Libertarian Studies 7 (Fall 1985): 281–85 [PDF]. For Hayek’s own contributions to the socialist calculation debate after Lange-Lerner, see F.A. Hayek, “Socialist Calculation 111: The Competitive ‘Solution'” (1940), and “The Use of Knowledge in Society,” (1945), in Individualism and Economic Order, pp. 181–208; 77–91.

[29]  Mises, Human Action, p. 696. Also see Salerno, “Mises as social Rationalist,” pp. 46–47ff.

[30]  Kirzner apparently believes that Mises’s concentration on entrepreneurship in his Human Action discussion of socialism demonstrates that Mises had gone over to the Hayek position. Kirzner seems to overlook the vast difference between Mises’s forecasting and appraisement view of entrepreneurship and his own “alertness” doctrine, which totally leaves out the possibility of entrepreneurial loss.

[31]  Lionel Robbins, The Great Depression (New York: Macmillan, 1934), p. 151.

[32]  F.A. Hayek, The Present State of the Debate,” in Hayek, Collectivist Economic Planning, p. 212.

[33]  Oskar Lange, “On the Economic Theory of Socialism, Part One,” p. 67. The Norwegian economist and defender of Mises’s position, Trygve Hoff, commented that “Quite apart from the fact that the equations the central authority would have to solve are of quite a different nature to those of the private individual, the latter tend to solve themselves automatically, which Dr. Lange must admit the former do not.” Hoff, Economic Calculation in the Socialist Society, pp. 221–22. This excellent book on the socialist calculation controversy was originally published in Norwegian in 1938. In contrast to Bergson’s almost contemporaneous survey article, Hoff’s English-language translation, published in 1949 in Britain but not in the United States, sank without a trace.

[34]  Oskar Lange, “The Role of Planning in Socialist Economy,” in The Political Economy of Socialism (1958) in M. Bornstein, ed., Comparative Economic Systems, rev. ed. (Homewood, Ill.: Richard D. Irwin, 1969), pp. 170–71.

[35]  Oskar Lange, “The Computer and the Market,” in A. Nove and D. Nuti, eds. Socialist Economics (London: Penguin Books, 1972), pp. 401–02.

[36]  Yuri M. Maltsev, “Soviet Economic Reforms: An Inside Perspective,” The Freeman (March 1990).

[37]  Bergson, “Socialist Economics,” p. 447.

[38]  One source on this pervasive system in the Soviet Union is Konstantin M. Simis, USSR: The Corrupt Society (New York: Simon & Schuster, 1982).

[39]  Michael Polanyi, The Logic of Liberty (Chicago: University of Chicago Press, 1951), pp. 111–37 and passim.

[40]  Mises, Human Action, pp. 698–99.

[41]  Peter J. D. Wiles, “Changing Economic Thought in Poland,” Oxford Economic Papers 9 (June 1957): 202–03. Also see Murray N. Rothbard, “Ludwig von Mises and Economic Calculation Under Socialism,” in Lawrence Moss, The Economics of Ludwig von Mises, pp. 67–77.

[42]  Lange, “The Economic Theory of Socialism,” p. 53.

For the history you didn’t learn in school, check out Liberty Classroom:

The post The End of Socialism and the Calculation Debate Revisited appeared first on Actual Anarchy.

By Hinton Bowers

Summer is fast approaching and now that our tummies are sculpted and legs toned, it’s time for break-up season! As a resident of California, I’ve heard a lot of talk about #Calexit for months now following the November election:

I However, do not favor Federal Secession at this time.

I’m really not interested in humoring temper tantrums. If there were some deep, principled argument being put forward by the liberty minded people of this state, I would feel more sympathetic;

but, let’s not pretend or hope that Calexit is about anything other than…

“I didn’t get my way, so I need a safe space!”

Breaking from The Union, and it’s constitutional protections for the individual (shaky as those rights may be these days), would be the wrong move for California residents. Were secession to pass: between Governor ‘Moonbeam’ and Commissar Feinstein, every non-conformist living in the state would probably be rounded up by SJW storm troopers and interned in ‘pelican bay’ by the end of the year. Would you trust them to draw-up your constitutional charter? To be your new Washington or Jefferson?

F*ck no, you wouldn’t.

The Constitution doesn’t directly mention unilateral secession, but it’s worth noting that the Supreme Court has ruled it to be illegal in the Texas v. White case; then a few years later, seems to contradict itself in Williams v. Bruffy. So who knows!

However, legal secession is clear, though highly improbable; it’s possible by amending the constitution.

In order for Californian secession to ‘prevail’, here’s what we would need:

• The Calexit referendum needs to pass and be signed into law. (But we’re not done yet…)
• A two-thirds vote would also be needed by each US Congressional branch.
• Or, a special constitutional convention could be formed by all 50 states for this specific purpose, where it would require a two-thirds vote in order to ratify California’s intent to secede.

So ‘dream on’, because a state vote for secession only begins the process of removal, it’s basically DOA…

But the Calexit movement is right about one thing:

Californians do need to secede; but from Sacramento instead.

Of course: I’m a HUGE fan of decentralization; with localization, people can correctly identify problems, and have a stronger impact on their communities; but more importantly, they would have control over their own lives and choices.

What are you to do though, when your state government is too centralized as well?

For those who may live outside of our ‘great commonwealth’, or for the locals who may not be aware: every few years a proposition is put forward to divide the state of California into several individual states. Though still linked to the federal government; this division would give every state it’s own charter, governor, congress, tax base, and electoral votes.

Now we’re talking! With this measure, every local community could go their own way, and decide their own fate (and have MUCH more impact on federal elections as well… their votes wouldn’t be taken for granted anymore.)

It’s really a ‘win win’ all around. (Of course heavy population centers object to this every time, because they want to have ‘your share’ of the electorate as well as their own…)

Personally, I’ve voted for this ‘break-up’ with Sacramento every single time the ‘prop’ (as we call them) has been on the ballet; and every single time I’ve watched the measure ‘crash and burn’ in spectacular fashion.

But now that secession is ‘hot’ again. It’s time for the majority of Californians to vote for this proposal instead: it’s time to break-up California.

California is not a community, its population is larger and more diverse than many countries in the world; with needs and opinions that vary greatly, it’s communities battle each other over ‘social issues’ and ‘resource allocation’ all the time. From the rural farmers in the central valley who need water for agriculture, to the urban denizens of Los Angeles who want to ‘protect the environment’; there are many blue, but also several red counties here. For many Californians, our elected officials rule from 400 miles away, so they might as well be in Washington, or on the surface of the moon…

I get it, a federal exit sounds sexy. Debating #Calexit is hot! But it’s local government that directly impacts your life as a citizen, and the state of California is not local enough for the people who live here…

The current California government is not democratic at all. It’s terrible at representing it’s own people, literally. When you look at the ratio of representative to resident in the California state house, it’s undeniably the worst in the union:

CA 488,000 to 1 vs. NH 2,006 to 1

The Russian Duma has a better rate of representation per citizen than California does…

Of course, there’s also the matter of personal citizenship. Does California have ‘the right’ to force me to renounce my US citizenship, and adopt their new ‘social contract’ because of my zip code? Even if I won’t vote for it? Or agree with anything they’re doing? I don’t believe they have that right.

On the bright-side, however, it’s very possible, even inevitable, that a federal ‘secession move’ by California would lead to the immediate break-up of the state, due to the differences listed above.

West Virginia came about that way…

“Then Hinton, if you support decentralization, why don’t you support #calexit!”

Why would Californians want to trade one ‘centrally planned’ state for what could easily become a more controlling ‘centrally planned’ nation run by people who live hundreds of miles away?

I also have many concerns about post-succession. It would be a logistical nightmare severing from the Federal Government, both in practicality and Ideology. Who’s to say that Gov. Jerry Brown or whoever the new ‘premiere’ of the California Republic is: doesn’t impose martial law to keep order? Or suspend representation all together? (Social democracies, of which Calexit would almost certainly draw inspiration from, have an awful track record when it comes to actual democracy. Because, their end goal is socialism; and a silly thing like voting just gets in the way of that…)

I’d rather Californians vote for our local communities from the beginning, and divide the state into manageable clusters where the citizens can have an actual say in the way they are governed, not vote for some ‘Californian nation-state’.

Consider the critical impact that your community has on you; with the adequate amount of representation you would have a real say in how these important local services are implemented:

• How many local taxes are to be collected? How will they be used?
• What kind of policing do you want in your community?
• How will you bring power to the community? Coal? Wind? Nuclear?
• Welfare: Who gets help? Under what conditions?
• What’s being taught to your kids in Public school? Private? Charter?
• Waste disposal?
• Red-light cameras?
• The list goes on, and on…

Whether these services should be privatized or not, the point is that they’re all tasked and completed LOCALLY; and ALL of them have a MASSIVE impact on your quality of life. A #Calbreakup would be the best way to begin a positive change statewide towards enfranchisement of the electorate; by having them take back their power through local control. (perhaps this could eventually spread nationwide also, as people begin to see the effects of better representation in the ‘new states’.)

It saddens me that there aren’t more Libertarians and Ancaps pushing for #Calbreakup instead of Calexit; as I believe the move would be closer to our values long term. This really feels like a case where it’s better to take ‘two leaps of faith’ at once, rather then one leap ‘off-track’. It’s Calbreakup or nothing for me, as I’d rather live a federal-ish structure, than a quasi-fascist state.

But, considering that two-thirds of California doesn’t support federal secession; and that one of the current leaders of the Calexit movement was exposed this week for being a potential Russian agent (Seriously, that’s what they’re reporting); a federal ‘secession move’ will probably remain a ‘California Dream’ for many years if not decades to come.

So hit the beach Mr. and Mrs. California, secure in the knowledge that you have a 488,000 to 1 say in your future…

Can I get a “Hip, hip, Hurray!” for California?

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[An excerpt from Chapter 10, Road to Serfdom (University of Chicago Press, 1944)]

All power corrupts, absolute power corrupts absolutely.
Lord Acton

We must now examine a belief from which many who regard the advent of totalitarianism as inevitable derive consolation and which seriously weakens the resistance of many others who would oppose it with all their might if they fully apprehended its nature. It is the belief that the most repellent features of the totalitarian regimes are due to the historical accident that they were established by groups of blackguards and thugs. Surely, it is argued, if in Germany the creation of a totalitarian regime brought the Streichers and Killingers, the Leys and Heines, the Himmlers and Heydrichs to power, this may prove the viciousness of the German character, but not that the rise of such people is the necessary consequence of a totalitarian system. Why should it not be possible that the same sort of system, if it be necessary to achieve important ends, be run by decent people for the good of the community as a whole?

We must not deceive ourselves into believing that all good people must be democrats or will necessarily wish to have a share in the government. Many, no doubt, would rather entrust it to somebody whom they think more competent. Although this might be unwise, there is nothing bad or dishonorable in approving a dictatorship of the good. Totalitarianism, we can already hear it argued, is a powerful system alike for good and evil, and the purpose for which it will be used depends entirely on the dictators. And those who think that it is not the system which we need fear, but the danger that it might be run by bad men, might even be tempted to forestall this danger by seeing that it is established in time by good men.

No doubt an English “fascist” system would greatly differ from the Italian or German models; no doubt if the transition were effected without violence, we might expect to get a better type of leader. And if I had to live under a fascist system I have no doubt that I would rather live under one run by Englishmen than under one run by anybody else. Yet all this does not mean that, judged on our present standards, a British fascist system would in the end prove so very different or much less intolerable than its prototypes.

There are strong reasons for believing that what to us appear the worst features of the existing totalitarian systems are not accidental byproducts, but phenomena which totalitarianism is certain sooner or later to produce. Just as the democratic statesman who sets out to plan economic life will soon be confronted with the alternative of either assuming dictatorial powers or abandoning his plans, so the totalitarian dictator would soon have to choose between disregard of ordinary morals and failure. It is for this reason that the unscrupulous and uninhibited are likely to be more successful in a society tending towards totalitarianism. Who does not see this has not yet grasped the full width of the gulf which separates totalitarianism from a liberal regime, the utter difference between the whole moral atmosphere under collectivism and the essentially individualist Western civilization.

The “moral basis of collectivism” has, of course, been much debated in the past; but what concerns us here is not its moral basis but its moral results. The usual discussions of the ethical aspects of collectivism refer to the question whether collectivism is demanded by existing moral convictions; or what moral convictions would be required if collectivism is to produce the hoped-for results. Our question, however, is what moral views will be produced by a collectivist organisation of society, or what views are likely to rule it. The interaction between morals and institutions may well have the effect that the ethics produced by collectivism will be altogether different from the moral ideals that lead to the demand for collectivism. While we are apt to think that, since the desire for a collectivist system springs from high moral motives, such a system must be the breeding ground for the highest virtues, there is, in fact, no reason why any system should necessarily enhance those attitudes which serve the purpose for which it was designed. The ruling moral views will depend partly on the qualities that will lead individuals to success in a collectivist or totalitarian system, and partly on the requirements of the totalitarian machinery.

* * * * *

…

That socialism can be put into practice only by methods which most socialists disapprove is, of course, a lesson learnt by many social reformers in the past. The old socialist parties were inhibited by their democratic ideals, they did not possess the ruthlessness required for the performance of their chosen task. It is characteristic that both in Germany and Italy the success of Fascism was preceded by the refusal of the socialist parties to take over the responsibilities of government. They were unwilling wholeheartedly to employ the methods to which they had pointed the way. They still hoped for the miracle of a majority agreeing on a particular plan for the organisation of the whole of society; others had already learnt the lesson that in a planned society the question can no longer be on what a majority of the people agree, but what is the largest single group whose members agree sufficiently to make unified direction of all affairs possible; or, if no such group large enough to enforce its views exists, how it can be created and who will succeed in creating it.

There are three main reasons why such a numerous and strong group with fairly homogeneous views is not likely to be formed by the best but rather by the worst elements of any society. By our standards the principles on which such a group would be selected will be almost entirely negative.

In the first instance, it is probably true that in general the higher the education and intelligence of individuals becomes, the more their views and tastes are differentiated and the less likely they are to agree on a particular hierarchy of values. It is a corollary of this that if we wish to find a high degree of uniformity and similarity of outlook, we have to descend to the regions of lower moral and intellectual standards where the more primitive and “common” instincts and tastes prevail. This does not mean that the majority of people have low moral standards; it merely means that the largest group of people whose values are very similar are the people with low standards. It is, as it were, the lowest common denominator which unites the largest number of people. If a numerous group is needed, strong enough to impose their views on the values of life on all the rest, it will never be those with highly differentiated and developed tastes it will be those who form the “mass” in the derogatory sense of the term, the least original and independent, who will be able to put the weight of their numbers behind their particular ideals.

If, however, a potential dictator had to rely entirely on those whose uncomplicated and primitive instincts happen to be very similar, their number would scarcely give sufficient weight to their endeavors. He will have to increase their numbers by converting more to the same simple creed.

Here comes in the second negative principle of selection: he will be able to obtain the support of all the docile and gullible, who have no strong convictions of their own but are prepared to accept a ready-made system of values if it is only drummed into their ears sufficiently loudly and frequently. It will be those whose vague and imperfectly formed ideas are easily swayed and whose passions and emotions are readily aroused who will thus swell the ranks of the totalitarian party.

It is in connection with the deliberate effort of the skilful demagogue to weld together a closely coherent and homogeneous body of supporters that the third and perhaps most important negative element of selection enters. It seems to be almost a law of human nature that it is easier for people to agree on a negative programme, on the hatred of an enemy, on the envy of those better off, than on any positive task. The contrast between the “we” and the “they”, the common fight against those outside the group, seems to be an essential ingredient in any creed which will solidly knit together a group for common action. It is consequently always employed by those who seek, not merely support of a policy, but the unreserved allegiance of huge masses. From their point of view it has the great advantage of leaving them greater freedom of action than almost any positive programme. The enemy, whether he be internal like the “Jew” or the “Kulak”, or external, seems to be an indispensable requisite in the armoury of a totalitarian leader.

That in Germany it was the Jew who became the enemy till his place was taken by the “plutocracies” was no less a result of the anti-capitalist resentment on which the whole movement was based than the selection of the Kulak in Russia. In Germany and Austria the Jew had come to be regarded as the representative of capitalism because a traditional dislike of large classes of the population for commercial pursuits had left these more readily accessible to a group that was practically excluded from the more highly esteemed occupations. It is the old story ofthe alien race being admitted only to the less respected trades and then being hated still more for practising them. The fact that German anti-semitism and anti-capitalism spring from the same root is of great importance for the understanding of what has happened there, but this is rarely grasped by foreign observers.

* * * * *

…

One of the inherent contradictions of the collectivist philosophy is, that while basing itself on the humanistic morals which individualism has developed, it is practicable only within a relatively small group. That socialism so long as it remains theoretical, is internationalist, while as soon as it is put into practice, whether in Russia or in Germany, it becomes violently nationalist, is one of the reasons why “liberal socialism” as most people in the Western world imagine it is purely theoretical, while the practice of socialism is everywhere totalitarian. [1] Collectivism has no room for the wide humanitarianism of liberalism but only for the narrow particularism of the totalitarian.

If the “community” or the state are prior to the individual, if they have ends of their own independent of and superior to those of the individuals, only those individuals who work for the same ends can be regarded as members of the community. It is a necessary consequence of this view that a person is respected only as a member of the group, that is, only if and in so far as he works for the recognized common ends, and that he derives his whole dignity only from this membership and not merely from being man. Indeed, the very concepts of humanity and therefore of any form of internationalism are entirely products of the individualist view of man, and there can be no place for them in a collectivist system of thought. [2]

* * * * *

…

It would, however, be highly unjust to regard the masses of the totalitarian people as devoid of moral fervor because they give unstinted support to a system which to us seems a denial of most moral values. For the great majority of them the opposite is probably true: the intensity of the moral emotions behind a movement like that of National-Socialism or communism can probably be compared only to those of the great religious movements of history. Once you admit that the individual is merely a means to serve the ends of the higher entity called society or the nation, most of those features of totalitarian regimes which horrify us follow of necessity.

From the collectivist standpoint intolerance and brutal suppression of dissent, the complete disregard of the life and happiness of the individual, are essential and unavoidable consequences of this basic premise, and the collectivist can admit this and at the same time claim that his system is superior to one in which the “selfish” interests of the individual are allowed to obstruct the full realisation of the ends the community pursues. When German philosophers again and again represent the striving for personal happiness as itself immoral and only the fulfilment of an imposed duty as praiseworthy, they are perfectly sincere, however difficult this may be to understand for those who have been brought up in a different tradition.

Where there is one common all-overriding end there is no room for any general morals or rules. To a limited extent we ourselves experience this in wartime. But even war and the greatest peril had led in this country only to a very moderate approach to totalitarianism, very little setting aside of all other values in the service of a single purpose. But where a few specific ends dominate the whole of society, it is inevitable that occasionally cruelty may become a duty, that acts which revolt all our feeling, such as the shooting of hostages or the killing of the old or sick, should be treated as mere matters of expediency, that the compulsory uprooting and transportation of hundreds of thousands should become an instrument of policy approved by almost everybody except the victims, or that suggestions like that of a “conscription of women for breeding purposes” can be seriously contemplated. There is always in the eyes of the collectivist a greater goal which these acts serve and which to him justifies them because the pursuit of the common end of society can know no limits in any rights or values of any individual.

But while for the mass of the citizens of the totalitarian state it is often unselfish devotion to an ideal, although one that is repellent to us, which makes them approve and even perform such deeds, this cannot be pleaded for those who guide its policy. To be a useful assistant in the running of a totalitarian state it is not enough that a man should be prepared to accept specious justification of vile deeds, he must himself be prepared actively to break every moral rule he has ever known if this seems necessary to achieve the end set for him. Since it is the supreme leader who alone determines the ends, his instruments must have no moral convictions of their own. They must, above all, be unreservedly committed to the person of the leader; but next to this the most important thing is that they should be completely unprincipled and literally capable of everything. They must have no ideals of their own which they want to realise, no ideas about right or wrong which might interfere with the intentions of the leader.

There is thus in the positions of power little to attract those who hold moral beliefs of the kind which in the past have guided the European peoples, little which could compensate for the distastefulness of many of the particular tasks, and little opportunity to gratify any more idealistic desires, to recompense for the undeniable risk, the sacrifice of most of the pleasures of private life and of personal independence which the posts of great responsibility involve. The only tastes which are satisfied are the taste for power as such, the pleasure of being obeyed and of being part of a well-functioning and immensely powerful machine to which everything else must give way.

Yet while there is little that is likely to induce men who are good by our standards to aspire to leading positions in the totalitarian machine, and much to deter them, there will be special opportunities for the ruthless and unscrupulous. There will be jobs to be done about the badness of which taken by themselves nobody has any doubt, but which have to be done in the service of some higher end, and which have to be executed with the same expertness and efficiency as any others. And as there will be need for actions which are bad in themselves, and which all those still influenced by traditional morals will be reluctant to perform, the readiness to do bad things becomes a path to promotion and power. The positions in a totalitarian society in which it is necessary to practice cruelty and intimidation, deliberate deception and spying, are numerous.

Neither the Gestapo nor the administration of a concentration camp, neither the Ministry of Propaganda nor the SA or SS (or their Italian or Russian counterparts) are suitable places for the exercise of humanitarian feelings. Yet it is through positions like these that the road to the highest positions in the totalitarian state leads. It is only too true when a distinguished American economist concludes from a similar brief enumeration of the duties of the authorities of a collectivist state that they would have to do these things whether they wanted to or not: and the probability of the people in power being individuals who would dislike the possession and exercise of power is on a level with the probability that an extremely tenderhearted person would get the job of whipping-master in a slave plantation. [10]

Footnotes

[1] Cf. now the instructive discussion in F. Borkenau, Socialism, National or International?, 1942.

[2] It is entirely in the spirit of collectivism when Nietzsche makes his Zarathustra say:

“A thousand goals have existed hitherto, for a thousand people existed. But
the fetter for the thousand necks is still lacking, the one goal is still lacking. Humanity has no goal yet.
“But tell me, I pray, my brethren: if the goal be lacking to humanity, is not
humanity itself lacking?”

[3] Quoted from an article of Dr. Niebuhr’s by E. H. Carr, The Twenty Years’ Crisis,
1941, p. 203.

[4] Findlay MacKenzie (ed.), Planned Society, Yesterday, Today, Tomorrow: A Symposium,
1937, p. xx.

[5] E. Halevy, L’Ere des Tyrannies, Paris, 1938, p. 217, and History of the English People,
Epilogue, vol. I, pp. 105-6.

[6] Cf. K. Marx, Revolution and Counter-revolution, and Engels’ letter to Marx, May 23,
1851.

[7] Bertrand Russell, The Scientific Outlook, 193 1, p. 211.

[8] B. E. Lippincott, in his Introduction to O. Lange and F. M. Taylor, On the Economic
Theory of Socialism, Minneapolis, 1938, p. 33.

[9] We must not allow ourselves to be deceived by the fact that the word power, apart from the sense in which it is used with respect to human beings, is also used in an impersonal (or rather anthropomorphic) sense for any determining cause. Of course there will always be something that determines everything that happens, and in this sense the amount of power existing must always be the same. But this is not true of the power consciously wielded by human beings.

[10] Professor F. H. Knight in The Journal of Political Economy, December 1938, p. 869.

F. A. Hayek

Friedrich Hayek  (1899 – 1992) was an economist and philosopher, author of seminal works that changed intellectual history, who won the Nobel Memorial Prize in Economic Sciences for his pioneering work in the theory of money and economic fluctuations and penetrating analysis of the interdependence of economic, social and institutional phenomena. He taught in Vienna, London, and Chicago.

This article was originally published on FEE.org. Read the original article.

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