Economic Calculation Argument

A socialist in discussons with I.O.E.

Supporters of capitalism, especially the von MIses school, may not be able to conceive of production without money and prices, but we socialists can. The definitive answer to your the “economic calculation problem” is a (largely) self-regulating system of stock control in which calculations are made in kind rather than in terms of a common unit like money.

A self-regulating system of stock control will permit producers in a socialist society (workplace councils, industry councils etc) to ascertain more or less immediately the availability of stocks of any particular item throughout the system; the communications technology to enable this to happen is already in place.

Given this, their assertions that the “only practicable way to tell how ‘abundant’ B is, by comparison with A, is to look at the relative prices” is absurd.

‘Abundance’ is a relationship between supply and demand, where the former exceeds the latter. In socialism a buffer of surplus stock for any particular item, whether a consumer or a producer good, can be produced, to allow for future fluctuations in the demand for that item, and to provide an adequate response time for any necessary adjustments.

Achieving ‘abundance’ can be understood as the maintenance of an adequate buffer of stock in the light of extrapolated trends in demand. The relative abundance or scarcity of a good would be indicated by how easy or difficult it was to maintain such an adequate buffer stock in the face of a demand trend (upward, static, downward).

It will thus be possible to choose how to combine different factors for production, and whether to use one rather than another, on the basis of their relative abundance/scarcity. By following the rule of using the minimum necessary amounts of the least abundant factors it will be possible to ensure their efficient allocation.

Money as a “general unit of cost” just would not come into it.

In further asserting that “if the output of X is increased, output of Y must be reduced” they are begging the question at issue, which is precisely, whether or not, resources are and always will be, scarce.

It is to assume that society’s resources are fully stretched and that there are no reserves to draw upon. But given the productivity of modem technology and the elimination of capitalist waste, there are likely to be substantial untapped reserves. In addition, socialist society can, as just explained, deliberately plan to produce surpluses of various items just to meet the eventuality you have in mind.

With regard to human resources in particular, even today under capitalism tens of millions of people are unemployed. Though of course in socialism no one will be “employed” as such, the average workload for individuals is likely to be much less (thus resulting in a sizeable reservoir of labour) and the opportunities for individuals to move flexibly from one kind of work to another much greater.

This will make much less likely the occurrence of the bottlenecks they foresee in the production of any particular good following an unexpected increase in demand for it.

But scarcity is not simply a function of supply; it is also a function of demand. It is in this area that the anarcho-capitalist critique of socialism, based on its premise of infinite demand, is particularly weak and unrealistic. For it takes little, if any, account of the effect of the social environment on the likely structure and size of demand in socialism.

In a system of capitalist competition, there is a built-in tendency to stimulate demand to a maximum extent. Firms, for example, need to persuade customers to buy their products or they go out of business.

They would not otherwise spend the vast amounts they do spend on advertising those products. At the same time, there is in capitalist society a tendency for individuals to seek to validate their sense of worth through the accumulation of possessions.

This is not surprising for if, as Marx contended, the prevailing ideas of society are those of its ruling class then we can understand why, when the wealth of that class so preoccupies the minds of its members, such a notion of status should be so deep-rooted. It is this which helps to underpin the myth of infinite demand.

In socialism, status based upon the material wealth at one’s command, would be a meaningless concept. Why take more than you need when you can freely take what you need?

In socialism the only way in which individuals can command the esteem of others is through their contribution to society, and the more the movement for socialism grows the more will it subvert the prevailing capitalist ethos, in general, and its anachronistic notion of status, in particular.

Nor do we accept their premise that prices arise out of conditions of scarcity. They arise out of conditions of private property.

So even if genuine shortages occur in the conditions of common ownership that will exist in socialism – it is likely that some shortages (e.g. decent housing) will persist (if only as a receding problem) into the early stages of socialism – this will not undermine the new society by leading to the re-emergence of money and prices.

For socialism to be established, there are two fundamental preconditions that must be met. Firstly, the productive potential of society must have been developed to the point where, generally speaking, we can produce enough for all. This is not now a problem as we have long since reached this point. However, this does require that we appreciate what is meant by “enough” and that we do not project on to socialism the insatiable consumerism of capitalism.

Secondly, the establishment of socialism presupposes the existence of a mass socialist movement and a profound change in social outlook. It is simply not reasonable to suppose that the desire for socialism on such a large scale, and the conscious understanding of what it entails on the part of all concerned, would not influence the way people behaved in socialism and towards each other. Would they want to jeopardise the new society they had helped create? Of course not.

One must therefore assume that whatever shortages may persist can be tackled by some system of direct rationing and will be borne with forbearance – even, one might say, with a sense of altruistic restraint.

For whatever the problems that socialism may have to contend with, and there will still be many, if the alternative has to be the re-instatement of capitalism then there would not be a real alternative.

Capitalist supporters seem to know the price of everything but the value of nothing.