Impossibilty of Economic Calculaiton
Impossibility: Oskar Lange
In attempting to answer the socialist economic calculation problem, Oskar Lange, actually provides evidence that supports the impossibility of Economic Calculation. Through use of the trail and error method, where officials monitor inventories of existing goods and adjust prices accordingly, Lange was able to identify price adjustment issues but did not arrive at a complete answer to the problem of calculation.
Through use of the trail and error Lange attempted to answer the calculation problem, however he only resulted to issues with price adjustments.
- State bureaucrats act as if they are reaping profits; hence they aim at maximizing social welfare, not the profitability of separate investments.
- Socialism cannot match the performance of capitalism in terms of social dividends and accumulation. However, this conclusion stemmed from solving the entrepreneurial problem not the calculation problem.
- Believed that entrepreneurs could not perform economic calculation because of financial markets. Socialist officials should be responsible for setting the rate of accumulation in order to improve consumer welfare. These officials would need to marginal interest rate estimation in order to calculate cost of investment. However, his argument is invalid, as Mises was not referring to capital accumulation.
- Inequality and the Economic Calculation: Argued that individual high incomes produced from capitalism could affect interest rates. Therefore socialism is more efficient in that consumers have less impact on fluctuation of interest rates. The cost of such a result is the loss of consumer sovereignty and decisions being made by selected political elites.
Hayek & The Socialist Calculation Debate || Friedrich A. Hayek || Ludwig Von Mises || What is Socialist Calculation Debate? || Critiques of the Socialist Calculation Debate || Knowledge Problem || The impact of Hayek's 1945 paper || Impossibilty of Economic Calculaiton || Authors' View || Questions to Ask || Sources Cited
