Part of the Studies in Soviet History and Society book series (SSHS)
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It was Ludwig von Mises who, in 1920, threw down the gauntlet which began the ‘Great Debate’ among academic economists on the rationality of the socialist economy. He argued that under socialism, with the abolition of the market, there can be no objective indicator of value, which will be supplanted by the politically-based preferences of the State administration. While the State may be able to obtain knowledge of what commodities are required by society, and may thus draw up a coherent list of priorities of ‘social need’, it will be unable to direct the use of the means of production rationally to the given ends, since it will have no way of calculating their relative values. Prices in this sector would of necessity be arbitrary, and could give no information on relative scarcity. Thus there would be no possibility of calculating costs of production, and therefore no possibility of producing the commodities identified as needed in an efficient, economical way:
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.1
KeywordsPolitical System Socialist Economy Central Authority Capitalist Economy Social Interest
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Notes and References
© Judy Batt 1988