Sunday, November 05, 2006

Economic Calculation in the Socialist Commonwealth

As Ludwig von Mises, the Austrian Economist, proved in his book "Economic Calculation in the Socialist Commonwealth", economic calculation under socialism is simply impossible. My reasons for saying this are quite different from Mises', but much easier for the layman to understand. I'll put it in very simple mathematical terms.

2+2=0: Value is Objective

Under socialist thinking, value is more than just something we perceive. Something has a certain value, and it doesn't change from person to person. To someone who believes it, mutually beneficial exchange is simply not possible. One man cannot make one dollar except at the expense of another. So if I have something I think is worthless and another person has something I value at $2, and what I have, he values at $2 and what he has he thinks is worthless, if we trade, and each come off perceiving the trade to enrich us both by $2 each, the total wealth increase is actually zero under socialist thinking.

2+2=2: Reality is Subjective

Socialists must always deny reality in order to practice socialism. They do this by picking and choosing the reality they want to live in, and dismissing the rest as absurd. An increase in the minimum wage, under socialist thinking, will cause low-wage employees to all get pay increases. This action has no consequences except when it's convenient for the Socialist thinker. Socialist thinkers ignore undesirable consequences. In this way, four real consequences can actually be two. While in the Socialist's subjective reality, the wages increase, and employees get more money, in the real world the effects are the employer's costs increasing and the subsequent firing of employees. Those effects, if even acknowledged, had other, unrelated causes.

2+2=3: Redistribution Maximizes Welfare

To a Socialist, 1 million dollars in the hand of one man is worth less than 1 dollar in the hands of 1 million men. This actually contradicts their belief that value doesn't change from person to person. The belief is that redistributing wealth evenly will maximize overall utility and "collective good." And this will not affect the production of wealth, as we already know how to do that and that will not change. So it is true under socialist thought that 2 men with $2 each has the same collective good as 1 man with $3 and 1 man with $0.

2+2≠4: Exploitation is Evil

Socialists think paying low wages for unskilled labor is inherently wrong. Paying a worker for what their labor is worth, that being whatever wage they agree to sell their time and energy for, is exploitive. So for two hours of work worth two dollars per hour, paying $4 is wrong because it's exploitive.

2+2=5: The Collective Supersedes Individuals

This is the basis of all collectivist philosophies. To Socialists, a thing can be completely separate from the sum of it's parts. The collective supersedes the individual. So for example, if you have 4 individuals forming a collective, a Socialist might judge the collective good to be worth 5 individuals, because the collective always outweighs the sum of it's parts. Under this logic it's perfectly fine to kill a dissident individual and that this can be done in such a way as to make all of them all better off than they were before, including the dead one, because it was done for the "collective good."

22=4: I Know Everything

It is possible under Socialist thinking for someone to know what is best for the collective. Someone can know how to create and distribute goods and services in such a way as to maximize overall welfare. In reality, the amount of information necessary for this to work in a complex economy is greater than what a single human mind can comprehend, much less evaluate without leaving out any relevant information. If 22 units of information are needed to plan the economy, then only 4 are actually used to plan the economy, because that's all that was "really needed" to plan the economy.

2+2=22: The Living Wage

A wage is really just a price paid for labor. Under Socialist thinking a wage is an amount of money given to someone by an employer for them to live off of. And if the wages given are lower than what is supposedly needed to live off of, then exploitation is taking place. Under socialist thinking, if I make $2 worth of butter per hour, let's say that's 10 sticks per hour for two hours a day, and thats my employment, my labor is enough to earn me a "living wage" of $22 per day. To a Socialist thinker I should be able to buy 110 sticks of butter a day, even though I only made 20.

For Socialist economic calculation to work, not only do all of these have to be true, but they must all be true simultaneously. That's why Economic Calculation in the Socialist Commonwealth simply does not work.

(revised 11/08/06)

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