Market Socialism and the Property Problem: Different Perspective of the Socialist Calculation Debate

Abstract

In 1920 Mises presented his famous essay on socialism, which would change, and eventually destroy, the whole scientific case for Marxist socialism (Mises 1990). Afterward, no one could seriously defend that doctrine. Mises argued that socialism cannot be effectively organized because of the calculation problem. He based his analysis on the comparison of central planning to the private property regime. Here is a brief summary of his argument. Socialism means the abolition of private property. More precisely—it means an outright nationalization, that is, a compulsory creation of one owner, which is to be sustained by compulsory measures. With one owner established, it is impossible for him to be involved in exchange, since by definition, an act of exchange is possible only if there are at least two owners. Hence without exchange it is impossible to create a price system, which reflects monetary inputs and outputs in the processes of production. Every factor needs to be priced in terms of money if one wants to assess its utility and productive employment in the economy. In the socialist economy there are no prices, thus this assessment does not exist. It is not possible to exercise economic judgment ex ante (before production) without prices; neither is it in the ex post (after employment decisions). After Mises demolished Marxist analysis, socialist economists did not question the idea that prices are a necessary means for the productive employment of the factors of production in a complex economy. Prices, in their eyes, were very important parameters, without which correct economic decisions in modern reality