Human Action Study Guide | Chapters 25 + 26
Channel: Derrick Horton
Date: 07/11/2019

XXV. THE IMAGINARY CONSTRUCTION OF A SOCIALIST SOCIETY

All older social reformers wanted to realize the good society by a confiscation of all private property and its subsequent redistribution. These plans became unrealizable when the large-scale enterprises in manufacturing, mining, and transportation appeared. The age-old program of redistribution was superseded by the idea of socialization.

The socialist doctrine rests upon three dogmas:

1. Society is an omnipotent and omniscient being.

2. The coming of socialism is inevitable.

3. The coming of socialism is desirable.

The essential mark of socialism is that one will alone acts. The employment of all factors of production is directed by one agency only.

XXVI. THE IMPOSSIBILITY OF ECONOMIC CALCULATION UNDER SOCIALISM

The problem under socialism is that one cannot, in comparing costs to be expended and gains to be earned, resort to any arithmetical operation. There is no rational choice of means for the best possible attainment of the ultimate ends sought.

Only in the last years have socialist writers embarked upon designing schemes for socialist economic calculation. Of course, they have lamentably failed in this task.

The problem of socialist economic calculation is precisely this: in the absence of a capital market (an outcome of abolition of private property of the means of production), i.e., market prices for the factors of production, a computation of profit or loss is not feasible.

The neosocialists want to abolish private control of the means of production, market exchange, market prices, and competition. But at the same time they want to organize the socialist utopia in such a way that people could act as if these things were still present. But the capitalist system is not a managerial system. One cannot play speculation and investment.

The state of equilibrium cannot be computed (by means of mathematical equations and operations) on the basis of the knowledge of conditions in a nonequilibrium state. It is no less erroneous to believe that such knowledge of the conditions under a hypothetical state of equilibrium could be of any use for acting man in a changing economy.