Forums of the Libertarian Left

There is a certain element of circularity in Mises' calculation argument, which goes back to the same circularity he used to argue that markets are a democracy. I paraphrase here, but in anticipating the objection that markets aren't democratic because people have different amounts of votes, he said "that's the result of a previous election." It's an ahistorical infinite regression. The same error undermines the calculation argument - producers are rewarded for allocating resources to fit consumer demand, and the buying power of consumers is determined by their previous ability as producers to satisfy consumer demand...

IMO the real truth of the calculation argument is that distributed processing of economic information is far superior to centralized processing of it. The fallacy is "distributed processing = markets."

Cork wrote:Welp, whatever helps you rationalize the crimes of the world's most despotic genocidal butchers.

I'm not trying to rationalise what Stalin did you're just trying to bait me into doing it. This isn't really relevant to the calculation argument anyway so lets just leave it.

Neverfox wrote:That's not quite it and is a little too broad. What it actually says is that "in a fully socialized economy, free of competitively generated prices, central planners would have no way to calculate which methods of production would be the most economical" That is, that given the billions of possible combinations of all the economy's resources and possible production projects you might choose to do or not to do, how can you tell if you are doing a good job of it, i.e. not wasting resources or hampering prosperity compared with some other configuration. It's not just some argument that say "If you want to make lemonade, a socialist can't figure out that you need lemons." That would indeed be a silly argument.

Well that seems pretty reasonable however I disagree that it's necessarily a blow for economic planning in that the Market isn't exactly the most efficient of calculators anyway.

In a free market, where prices are free to rise and fall without restriction, the price of a good rises when demand increases, and falls when supply increases.

But demand on the market isn't determined by actual human needs or wants but by money which some people have in greater quantities. Also a high demand for a product isn't necessarily a sign that that product is actually being used, just that it's being bought. I could buy a widget from the widget maker and then never use it or accidentally throw it out. If that happens on a large scale then even though the widget maker is profiting all he's really doing is producing useless junk. The widget maker could also artificially inflate demand through advertising etc

Yes, but that's not the problem for Mises. The problem is "what and how many goods do we produce?" and "Is exerting this amount of effort a good use of that effort?", not just the technical specs of how much labor a unit of goods takes. Even if you knew the labor values of ever technical process ever invented, you still need to plan which to do and which to leave on the shelf. The market mechanism claims that the profit incentive drives this invisibly.

Well one of the main factors that the Market Mechanism doesn't take into account in my view is Job satisfaction. The most profitable method of production might not be the most comfortable method for the workers and vice versa.

You are thinking only in terms of a single process ("I need nails, 5 pieces of wood and a hammer to make one birdhouse") when the problem that the ECA is addressing is different: "John wants to make birdhouses and Suzy wants to make sculptures out of wood & nails and ....[insert a hundred million other people all wanting wood and nails for their various plans]" and we've only got 100000 pieces of wood and 1000000 nails. What's the best use of them? Who gets what? Who gets turned away and why? Will we have enough wood to keep the process going and growing or will we waste it too fast and die out?" Now take that times a million or so...

Well it's difficult but it's not impossible. I mean first of all if the planning is localised/decentralised then the issue becomes much less severe i.e, Tom wants to build a shed and Jane wants to build a parkbench and we've got 30 pieces of wood and so many other nails is a lot easier to solve than the problem of a hundred million people and a million nails and pieces of wood.

At this point I'll wrap up a too-long post by recommending Carson's chapter (7 I think of O -Theory) on the calculation argument and how it applies to a Coasean theory of the firm.

OK, I'll check it out.

Ceapmann wrote:IMO the real truth of the calculation argument is that distributed processing of economic information is far superior to centralized processing of it. The fallacy is "distributed processing = markets."

Now that's an interesting line of argument because a certain P.Kropotkin once wrote:

Kropotkin wrote:Production and exchange represent an undertaking so complicated that the plans of the state socialists, which lead inevitably to a party dictatorship, would prove to be absolutely ineffective as soon as they were applied to life. No government would be able to organize production if the workers themselves through their unions did not do it in each branch of industry; for in all production there arise daily thousands of difficulties which no government can solve or foresee. It is certainly impossible to foresee everything. Only the efforts of thousands of intelligences working on the problems can cooperate in the development of a new social system and find the best solutions for the thousands of local needs.

Zanthorus wrote:Well that seems pretty reasonable however I disagree that it's necessarily a blow for economic planning in that the Market isn't exactly the most efficient of calculators anyway.

The real problem for both sides is defining exactly what efficiency means. It might be that the whole concept is a red herring.

But demand on the market isn't determined by actual human needs or wants but by money which some people have in greater quantities.

Yes, the "voting with dollars" metaphor is hard to swallow but one flaw with criticisms of this metaphor make is to forget that, unlike a democracy in politics, there is not just one winner (there isn't just one product made that represents the choice of the richest collective). It's more like a proportional representation. But the problem you raise is important: the "candidates" one can vote for are limited by the money one has.

Also a high demand for a product isn't necessarily a sign that that product is actually being used, just that it's being bought. I could buy a widget from the widget maker and then never use it or accidentally throw it out. If that happens on a large scale then even though the widget maker is profiting all he's really doing is producing useless junk. The widget maker could also artificially inflate demand through advertising etc

Indeed, which was the part of Fekete's point about how the speculator is ignored in talks of supply and demand.

Well one of the main factors that the Market Mechanism doesn't take into account in my view is Job satisfaction. The most profitable method of production might not be the most comfortable method for the workers and vice versa.

Something else from Joseph Wang:

Joseph Wang wrote:One of the lessons from Chinese economic reform is that corporate competition is Darwinian and not Lamarckian. It is not that the market magically encourages companies to be better, it doesn’t. If you have an inefficient company that is marginally profitable, it can sustain this indefinitely, and there is no particular market pressure to have a marginally profitable company improve if the managers don’t care.

What the market does do is to kill companies that are particularly badly run. When a company is badly run, it runs out of cash and dies. The beauty of this situation is that the market doesn’t care what the managers do. If you have managers that are sufficiently bad, they will run out of money and cease being managers, and the business will fold, and this is an automatic process.

Well it's difficult but it's not impossible. I mean first of all if the planning is localised/decentralised then the issue becomes much less severe i.e, Tom wants to build a shed and Jane wants to build a parkbench and we've got 30 pieces of wood and so many other nails is a lot easier to solve than the problem of a hundred million people and a million nails and pieces of wood.

True, but Mises, to his credit, admitted as much. We said that it was a matter of scale and that Crusoe would do fine without prices but the variables would explode exponentially in larger economies. The capitalist firm itself is a sort of planned economy existing in a market sea, the size of may be determined by the trade-offs between calculation cost (the planning) and transaction costs (the market).

Now that's an interesting line of argument because a certain P.Kropotkin once wrote:

There is also this, predating Mises.

neverfox wrote:The real problem for both sides is defining exactly what efficiency means. It might be that the whole concept is a red herring.

According to that article -

The exchange paradigm, deprived of the perfection of efficiency, can set no absolute standard. Its normative criteria must therefore be comparative. It can do no more than compare one situation with another and ask which of the two is preferable.

i.e we still have a notion of efficiency only with different systems in comparison with each other rather than with an absolute normative standard. Or is there something that I'm not getting (Note: I only skimmed through that article briefly)?

Also what would be the consequence for both sides of the debate if efficiency was a red herring?

Yes, the "voting with dollars" metaphor is hard to swallow but one flaw with criticisms of this metaphor make is to forget that, unlike a democracy in politics, there is not just one winner (there isn't just one product made that represents the choice of the richest collective). It's more like a proportional representation. But the problem you raise is important: the "candidates" one can vote for are limited by the money one has.

In comparison to the plutocracy that currently own most of the wealth most people might as well be taking part in the current afghan elections for all it's worth.

Joseph Wang wrote:One of the lessons from Chinese economic reform is that corporate competition is Darwinian and not Lamarckian. It is not that the market magically encourages companies to be better, it doesn’t. If you have an inefficient company that is marginally profitable, it can sustain this indefinitely, and there is no particular market pressure to have a marginally profitable company improve if the managers don’t care.

What the market does do is to kill companies that are particularly badly run. When a company is badly run, it runs out of cash and dies. The beauty of this situation is that the market doesn’t care what the managers do. If you have managers that are sufficiently bad, they will run out of money and cease being managers, and the business will fold, and this is an automatic process.

Not exactly reassuring. It only gaurantees against harsher treatment of workers while some could still be suffering under more mild drudgery.

neverfox wrote:What it actually says is that "in a fully socialized economy, free of competitively generated prices, central planners would have no way to calculate which methods of production would be the most economical" That is, that given the billions of possible combinations of all the economy's resources and possible production projects you might choose to do or not to do, how can you tell if you are doing a good job of it, i.e. not wasting resources or hampering prosperity compared with some other configuration.

Well, if central planners can't calculate the "most economical" model, than neither can anyone else. Right? So resources will be wasted, no matter the decision-making model, unless we happen to stumble onto the most efficient model right off the bat (and don't stumble off again, since we wouldn't have a way of knowing it was the most efficient). Trial and error, with a certain amount of resource-waste, seems to be inevitable. The absence or presence of price data doesn't seem to help much.

Here is Caplan summarizing Mises:

Bryan Caplan wrote:if the state owns all of the capital goods, there will be no market for capital goods; with no market for capital goods, no capital-goods prices; no prices, no numbers to crunch to determine the cheapest way to do things.

The problem is exacerbated by the fact that the choices you make in one process will have ripple effects on all others and "will squander factors of production both material and human".

But isn't Caplan really arguing in a (fairly small) circle? "If we don't know the price of something, then we don't know if it's cheap..." Price data isn't necessarily that rich, or that connected to this business of "squandering factors of production." If your concern is that factors of production not be squandered, then it seems like some sort of cost-data (no doubt as heavily subjectivized, in many ways, as price data) is more to the point. At the very least, we need some of both.

Working in a fairly centralized industry (publishing/bookselling) which is currently in the midst of both potentially cataclysmic price wars and the retail equivalent of a massive assembly-line speedup for labor, I'm very skeptical that market-clearing price tells a great deal about the efficient use of factors of production. "What the market will bear" and efficiency are pretty obviously not the same thing, even if they sometimes converge. Every decrease in product price in my store corresponds to some increase in job precarity and/or actual decrease in labor-hours and/or increase in the "intensity" of labor in the hours worked. If Labor has to purchase its own product, then we're probably still looking at a net loss, if we take all aspects of labor cost into consideration. And, of course, the key innovation in my particular field this year is to attempt to "make demand" for particular items -- precisely on the central planning model. Austrian economics is useful for explaining the reasons that resources as being massively misallocated (by almost any sane model) in this industry, but it isn't at all clear that any amount of price data could straighten things out.

shawnpwilbur wrote:Trial and error, with a certain amount of resource-waste, seems to be inevitable. The absence or presence of price data doesn't seem to help much.

Sounds a bit like Oskar Lange's solution to the problem.

Zanthorus wrote:

shawnpwilbur wrote:Trial and error, with a certain amount of resource-waste, seems to be inevitable. The absence or presence of price data doesn't seem to help much.

Sounds a bit like Oskar Lange's solution to the problem.

Except that my suggestion is that the introduction of price data into the equation doesn't necessarily help at all in addressing the waste-of-resources issue.

shawnpwilbur wrote:Well, if central planners can't calculate the "most economical" model, than neither can anyone else. Right? So resources will be wasted, no matter the decision-making model, unless we happen to stumble onto the most efficient model right off the bat (and don't stumble off again, since we wouldn't have a way of knowing it was the most efficient). Trial and error, with a certain amount of resource-waste, seems to be inevitable. The absence or presence of price data doesn't seem to help much.

Well the typical response would be that "anyone else" wouldn't need to bother given the right set of rules ("freedoms", "property") and the truth of Say's law. Ultimately, "waste" is indeterminate without a benchmark and it's not clear what that should be. For Say's law fans, it's simply lack of glut but the composition could take make forms. To me though that seems to leave too many degrees of freedom in the system.

But isn't Caplan really arguing in a (fairly small) circle? "If we don't know the price of something, then we don't know if it's cheap..." Price data isn't necessarily that rich, or that connected to this business of "squandering factors of production." If your concern is that factors of production not be squandered, then it seems like some sort of cost-data (no doubt as heavily subjectivized, in many ways, as price data) is more to the point. At the very least, we need some of both.

Actually Caplan isn't arguing anything here but relaying the Misesean argument (though he ultimately agrees with the essence and disagrees with the upshot, i.e. chaos without prices). I get your point though.

Every decrease in product price in my store corresponds to some increase in job precarity and/or actual decrease in labor-hours and/or increase in the "intensity" of labor in the hours worked.

I was reading a Castoriadis essay today where he said, "Left to itself, the minimization of costs logically implies the lowest possible wages for the highest possible productivity."

If Labor has to purchase its own product, then we're probably still looking at a net loss, if we take all aspects of labor cost into consideration.

Of course, labor in this case is far removed from the price-cutting decisions.

And, of course, the key innovation in my particular field this year is to attempt to "make demand" for particular items -- precisely on the central planning model.

I think all firms have to confess to being central planners to some (and often a large) degree. I've made this point (and Kevin before; and Herbert Simon before that) that the market doesn't seem to find its way past security in the corporate lobby.

Honestly, all of this sounds more and more like theory relatively untouched by the actual details of production, distribution and consumption. Prices allow us to tell what things cost, at least some of the time and in some ways, and cheap things are generally better than costly ones, except when the cheapness is costly -- which is frequently the case. The fight between historical capitalism and the various contenders is largely a fight over the ways that we will judge cheapness and expense, as well as waste of economic factors. You can answer those questions in ways that aren't generally beneficial, and all organizations seem to share as many diseconomies of scale as economies. But I don't see much indication that there is an "economic calculation problem" specific to non-price economies.

I've argued over at RevLeft for over a year about economics. I'm pretty well known there in the OI forum. I have yet to really hear an articulated description of what an an-com economy would look like. I assume its a gift economy of sorts with no money, no property, no markets. Am I wrong?

Some of the posters there are quite dogmatic and stick to ad-homs and strawmen however some are pretty decent and have a clue about economics or at least markets they criticize so harshly.

Zanthorus wrote:i.e we still have a notion of efficiency only with different systems in comparison with each other rather than with an absolute normative standard. Or is there something that I'm not getting (Note: I only skimmed through that article briefly)?

Meir Kohn wrote:For the exchange paradigm, the concept of efficiency is meaningless. To begin with, the economy is not in trading equilibrium: indeed unrealized potential gains from exchange are commonplace. Their pursuit and creation are precisely what drives the process of economic growth. An absence of unrealized potential gains would be evidence not of efficiency but of stagnation. Second, the potential of the economy is not a given. As individuals continually create new opportunities for exchange they continually expand the potential of the economy. Since there is no set destination toward which the economy is headed, it is meaningless to ask whether or not it has arrived.

We still need normative principles, "a standard by which to judge whether or not the state of a given economy is a desirable one", yes, but efficiency (unlike say stability or adaptability or growth) needs a concept of perfect equilibrium that doesn't exist and is static rather than dynamic.

Kohn wrote:While the exchange paradigm possesses no generally agreed-upon normative criteria, there are some fairly obvious candidates. The exchange paradigm sees the economy as being in a process of continuing change. It therefore seems natural to consider normative criteria that are dynamic—the rate of growth, the adaptability of the economy, the stability of the economy. Other things equal, faster growth would seem preferable. If the rate of growth is uneven, then its variability matters as well as its speed. One source of variability is change in the external environment: other things equal it would seem preferable that the economy adjust to such change more quickly—that it be more adaptable. A second source of variability is the process of growth itself: the process may involve periodic crises or setbacks. Other things equal, it would seem preferable that the economy be more stable (i.e., less subject to endogenous variability).

Consequently, good institutions or policies are those that, other things equal, accelerate growth, contribute to the economy’s adaptability and improve its stability. Bad institutions and policies are those that impede growth, reduce adaptability and increase instability. However, the multiplicity of criteria suggests tradeoffs. A particular institution or policy might promote more rapid growth, but it might also reduce adaptability or stability. When judging the effects of institutions or policies or when comparing economies, we may therefore have to trade off one criterion against another.

I can see an opening for left-libertarians in the exchange paradigm because it allows for a larger scope of possible candidates and I see the kinds of experiments of Warren, Greene and other mutualists as being attempts to bring the focus on institutions that foster a normative principle of reciprocity into play. It's a principle that can be judged more "directly" from the zeitgeist so to speak.

Zanthorus wrote:Not exactly reassuring. It only gaurantees against harsher treatment of workers while some could still be suffering under more mild drudgery.

It wasn't meant to be (though Wang may not have seen it as a problem).

I think the ECA boils down to planners wouldn't know the true or real costs of engaging in projects. Thus, they wouldn't know profit from loss. Mises asserts that costs are calculated via the price mechanism generated in a free economy. I agree with him on that point.

Ardvark wrote:I think the ECA boils down to planners wouldn't know the true or real costs of engaging in projects. Thus, they wouldn't know profit from loss. Mises asserts that costs are calculated via the price mechanism generated in a free economy. I agree with him on that point.

But it's unequivocal nonsense. You're comparing the planned economy with the market but taking the market standards of profit and loss and using them as the yard stick. It's a neat little piece of tautological reasoning 'The market is the best mechanism for determining market standards of profit and loss' but it doesn't really get us anywhere.

Well, if the planned economy had a concept of property rights ( i.e. two or more agents can legitimately trade their own property) then you can have some concept of cost. If a single entity or 'firm' owns everything then there can be no cost comparison. That was Mises' particular critique of socialism. There is no measuring stick to define a set rate of profit ( to count as 'profit') in the market economy. Monetary profit is measured by units of account ( money) for obvious reasons. You must be able to know the cost of engaging in a particular project in order to determine whether it was a profitable venture. If it was profitable that means whatever good or service you provided was successfully absorbed by consumers in the economy.

Actually, there is no problem determining costs without prices -- assuming that you don't insist on having your costs represented as prices. Now, it is not clear that one can compare kinds of costliness against one another in a non-market economy with the same apparent ease as we do in a market economy -- but, again, there are good reasons to suspect that those cost comparisons are far from bulletproof.

Imagine a biocentric society, which emphasized interconnectedness over individuality, as well as interconnectedness with "the environment" -- an ecological communitarianism. It has its own notions of property, which are heavy on recognition of collective property rising from the associated labor or specific collectives, and acknowledge overlapping property claims. It sets the bar for resource appropriation very high, outside of a well-developed ethic of seeing to one another's basic needs. But it also prizes singularity, which provides at once an alternate support for individual freedom and a rough and ready yardstick for measuring the cost of the loss of a species, or ecosystem, or view, etc. Based on these values, the practical economic details might work out in a variety of ways, but let's make our ecological communitarians broadly mutualist in their political economy. Coming to different conclusions about individual property than most societies, they still opt for equitable commerce between singular individuals, for reasons that are consequentialist or dependent on an antinomic principle. And they believe firmly that the exercise of individuality should be at the individuals' own costs. There's nothing here that couldn't be teased out of the writings of Proudhon, Leroux, Warren and Ingalls, with the addition of some more contemporary science. And there's nothing that couldn't be derived from a different reading of the same data treated by the natural rights tradition. The values are even values that we give more than a bit of lip service to.

If you start with this society, which significantly does not start with a notion that all costs can be compared to one another on a dollars-and-sense scale, a couple of things seem likely. Ecological awareness is likely to give the "ongoing projects" of nature some virtual standing in human decision-making -- particularly because we are just as unable to calculate the impact of natural-resource appropriation/ecosystem disruption as we are to make other sorts of large scale calculations -- and because a strong sense of the various kinds of interconnectedness makes those appropriations/disruptions much more likely to be understood as invasions (of a variety of sorts.) At some point, even if the individuals involved had experience of the process of reducing all values to exchange-values for comparison, other considerations are likely to lead them to consider many cost-comparisons impossible because the kinds of costliness are simply incommensurable. Strip mine (and its resulting ecosystemic alterations) vs. mountaintop (and its role in the current ecosystemic systems) -- between the complexities and the very kinds of costliness involved, it's hard to see how reducing things to a comparison of "prices" (prices for what, offered by who to whom, with what attendant cost, etc., etc., etc.?) is likely to be anything but a travesty. The material complexities alone suggest this, and when the subjective elements are included (subjective values and subjective costs) the notion that some market-clearing price (and the ability to raise it, outside of any inclusive deliberation between the interested parties) could "decide" the issues just seems silly. Certain kinds of things wouldn't get built in this society, but other things would be logical outcomes of the different set of property rules, notions of profit, etc. My guess is that the society in question would be more socialistic in general assumptions, but better avoid the kinds of to-the-highest-bidder evasions of self-management and self-government that markets are presently so good at.

a socialist society

I'd even say that the problem is that 'society' can not determine anything, since it is not an actual entity and has no set of values; the problem is precisely that relative scarcity is only coherent and meaningful within the context of subjective evaluations of goods (of first and higher orders) and that this scarcity can only be compared interpersonally with the existence of a commonly accepted medium of exchange which can serve as a unit of accounts.

*porks vichy in ass* PURGE the counter-revolutionaries!
*makes vichy give bj* USE THE FORCE of sexism!

Vichy wrote:I'd even say that the problem is that 'society' can not determine anything, since it is not an actual entity and has no set of values;

I never thought I'd ever end up defending or reccomending this to anyone but you seriously need to read this:

Social Anarchism or Lifestyle Anarchism - An Unbridgable Chasm, Murray Bookchin

And Bookchins reply to his critics:

Whither Anarchism?

I realise you aren't a primmie or mystic or whatever but you're still a myopic hyper-individualist which means Bookchins book has relevance here.

I realise you aren't a primmie or mystic or whatever but you're still a myopic hyper-individualist

I'm not an individualist, I am an individual.

"We are touching one a ... distinction between anarch and anarchist; the relation to authority, to legislative power. The anarchist is their mortal enemy, while the anarch refuses to acknowledge them. He seeks neither to gain hold of them, nor to topple them, nor to alter them - their impact bypasses him. He must resign himself only to the whirlwinds they generate."
...
"The anarch is no individualist, either. He wishes to present himself neither as a Great Man nor as a Free Spirit. His own measure is enough for him; freedom is not his goal; it is his property. He does not come on as foe or reformer: one can get along nicely with him in shacks or in palaces. Life is too short and too beautiful to sacrifice for ideas, although contamination is not always avoidable. But hats off to the martyrs."

Ernst Jünger, Eumeswil

Cool, good luck with being an anti-social crackpot militarist reactionary.

And it doesn't matter if you're an individual or an individualist. Outside of a collective or social context the individual is meaningless.

Zanthorus wrote:And it doesn't matter if you're an individual or an individualist. Outside of a collective or social context the individual is meaningless.

That's retarded.

Vichy wrote:

Zanthorus wrote:And it doesn't matter if you're an individual or an individualist. Outside of a collective or social context the individual is meaningless.

That's retarded.

*bashes vichy with the collective force* SOCIETY SEZ!
*boinks vichy with the authority of society* MINE!

Brainpolice wrote:

Vichy wrote:

Zanthorus wrote:And it doesn't matter if you're an individual or an individualist. Outside of a collective or social context the individual is meaningless.

That's retarded.

*bashes vichy with the collective force* SOCIETY SEZ!
*boinks vichy with the authority of society* MINE!

I mean, what he said is prima facie nonsensical. 'Meaning' literally only exists within the context of an actual specific entity's subjective ontological manifestation; collectives and societies aren't even real 'things' in the metaphyiscal sense.

Vichy wrote:

Zanthorus wrote:And it doesn't matter if you're an individual or an individualist. Outside of a collective or social context the individual is meaningless.

That's retarded.

No, outside of a group context the individual loses all the attributes upheld as worthy by anarchists. Remember the line freedom is always the freedom of dissenters? To be a dissenter you need something to dissent from. I'm not saying that individuals are bound by group decisions or anything like that but what I am saying is that the individual is nothing outside of a social context.

Not to mention your ideas have been shaped by the collective forces of society ever since you were born. Ironically, it's at least partly societies fault that you're a myopic hyper-individualist.