Critiques of the Socialist Calculation Debate

Although Hayek has fervent supporters at a number of schools, we would be ignorant to not acknowledge the the presence of his opponents. A few eminent economists attack Hayek for being overly subjective and now fully understanding human nature. Lawson (1992) has argues that psychological and sociological research has revealed that human behavior is highly routinized and coordinated in the main by unconscious brain functions. Furthermore Daniel Dennett, a prominent American philosopher who currently holds the position: Director of the Center for Cognitive Studies and the Austin B. Fletcher Professor of Philosophy at Tufts University, claims that experiments in neuropsychology indicate that people act first, and become conscious of their intention to act later. The economic subject of Hayek is not "empirically given at all, but is rather a reification of economic theory." The rational economic subject makes sense only in terms of formalized calculating procedures, which, if they are realized in practice, are more likely to be materialized in the accounting and management practices of firms than in the brains of individuals. Economic theory then projects back these practices, rational for the enterprise as a juridical subject, onto a supposedly constitutive human subject.

Some argue that Hayek's argument is more moral than scientific, and dissolves the essence of economics with psychology by attributing too much value on the human behavior. Another strong criticism of Hayek is that all his attention is taken by the knowledge problem. The knowledge problem though can be solved with efficient means of communicating information, such as have been quickly developing not only in the present but also in the past century. He does not attribute enough value to contractabilty. Economic relations have always been using methods to convey information such as labor contracts, for example. Each party is given the liberal right to give as much information as wanted, so even not giving full information can be red as a message. In this context, the knowledge problem cannot be a good vindication of all the problems of socialism.

Another criticism points out that our commercial society cannot survive without mathematical calculation. Economic rationality and mathematical calculation are not only compatible, they actually co-exist in a sustainable symbiosis. "Economic rationality is an algorithmic process supported by a machinery for computation and information storage."

Hayek denies the possibility to use knowledge locally, and this is definitely a short-sightedness of his argument. Though centralizing knowledge leads to inefficiency, this does not mean that local knowledge cannot be utilized efficiently by local municipalities for example. However, the critics do not offer an alternative for overcoming the incoherence that would result from aggregating this local planning.

The Price as an Inefficient Communicator

Hayek's Tin Example (LINK!!!) is an overstatement of the real power of price. Hayek suggests that a rise in the price of a tin conveys information about what is happening with the world's resources. But tin's price might rise because a miner's labor union has gained more political power. Thus, prices are a necessary but not a sufficient signal of information. Further, we are not aware whether the change in price is temporary or permanent, and prices would be comprehensive signals only if they are at long-run equilibria.

Oscar Lange sees prices just as an accounting experience. He suggests that whwn socialist managers are minimizing costs, they are actually using prices and the information they contain in the same way as Hayek suggests.

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Friedrich A. Hayek || Ludwig Von Mises || What is Socialist Calculation Debate? || Critiques of the Socialist Calculation Debate || Advocates for the Socialist Calculation Debate || Knowledge Problem || Questions to Ask