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The Achilles' heel of a collectivist economic system was pinpointed more than 50 years ago by the Austrian school in the socialist calculation debate. Gorbachev's perestroika fails to recognise the debate's implications. Advises him to redirect his economy to the production of more consumer goods and services to stifle discontent. (SJK)

Since the late 1970s there have been a number of articles devoted
to re‐evaluating the issues and arguments involved in the debate
concerning comparative economic systems. The present state of this
continuing debate is evaluated with regard to modern theories of
planning, bureaucracy, motivation and property rights. It appears that
the debate has not been settled yet.

The socialist calculation debate pitted members of the Austrian School of economics and a few others against those who proposed that a nation's economy could be centrally and mathematically planned. This was a huge undertaking, and it presented many difficulties, but it also promised great rewards. Some facets of the problem might even be soluble with today's computing technology. Yet the prospect of socialist calculation remains illusory. This paper explains why, with reference to real-world attempts at solving the calculation problem as well as the seminal works of F. A. Hayek and Ludwig von

The debate that raged in the interwar period between the Austrian economists (who argued the thesis that under socialism it would not be possible to engage in rational economic calculation) and socialist economists (who rejected that thesis) was, narrowly conceived, a debate in positive economics. What was being discussed was certainly not the morality of capitalism or of socialism. Nor, strictly speaking, was the debate even about society's economic well-being under socialism; it concerned the ability of central planners to make decisions that take appropriate account of relevant resource scarcities, in the light of consumer preference rankings. To be sure, the extraordinary interest which surrounded the debate and the passions that lurked barely below its surface testified to the powerful implications of the debate for crucial issues in welfare economics. The Austrians were not merely exploring the economies of socialism; they were in effect demonstrating that, as an economic system attempting to serve the needs of its citizens, socialism must inevitably fail. But, even if the debate is interpreted in its broadest terms, as a debate in welfare economics, it represented a sharp break widi traditional polemics relating to the socialism-capitalism issue. Traditionally the arguments for or against capitalism had, until 1920, been deeply involved in ediical questions. Mises's 1920 challenge to socialism, in contrast, was explicit in making no attempt to address any claims concerning the alleged moral superiority of socialism. He simply argued that, as an economic system, socialism was inherendy incapable of fulfilling the objectives of its proponents; central planners are unable to plan centrally.

The “socialist calculation debate” happened in the 1920s and 1930s. The economics profession was developing a vision of the economy as made up of prices and quantities for goods and services, based on supply and demand. Socialist economists (for example, Oskar Lange) sought to build on this framework. Their argument was along the following lines: … Continue reading Will AI Make a Planned Economy Feasible? The Socialist Calculation Debate Revisited
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