‭Naifu and the infantile disorder of the economic calculation problem‬

‭ udwig von Mises was an Austrian economist who published in 1922 the book Socialism: An‬
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‭Economic and Sociological Analysis, with the aim of describing and criticizing the socialist doctrine.‬
‭On this occasion, we will focus on the argument of the "impossibility of economic calculation in‬
‭socialism," showing in an immanent way, the circular and closed reasoning of Mises. For this, we will‬
‭also refer to the book Human Action (published in 1949).‬

‭ egarding other aspects of the work, which are much more open to criticism and show a lack of‬
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‭understanding not only of Marxism but also of classical political economy, they can be the subject of‬
‭later discussion.‬

‭ l.-THE PROBLEMS OF DYNAMIC SOCIALIST ECONOMY‬

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‭The result of the investigations carried out in the previous chapters is that they have shown‬
‭the difficulties that the construction of a socialist economy will encounter. In the socialist‬
‭community, the existence of economic accounting is impossible, so it is not possible to‬
‭determine the cost or the performance of an economic action, nor take the result of the‬
‭calculation as a norm for action (1). This reason alone would be enough to demonstrate that‬
‭socialism is impracticable. But, in addition, a second reason, very difficult to overcome, also‬
‭opposes its realization. It is not possible to find an organizational form that makes the‬
‭individual’s economic activity independent of the collaboration of other citizens without‬
‭turning this activity into a game of chance, from which all responsibility would be excluded‬
‭(2). As long as these two problems are not resolved, socialism will appear as something‬
‭unrealizable in an economy that is not in a completely static state.‬

‭ o far, very little attention has been paid to these two crucial problems. The first of them has‬
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‭been almost ignored because the idea that labor time could serve as a scale for measuring‬
‭value has not been discarded (1). But many of those who have recognized that the labor‬
‭theory of value was untenable still persist in believing that value can be measured. The‬
‭numerous attempts made to discover a standard of value are proof of this. It was necessary to‬
‭recognize the impossibility of measuring value and grasp the true nature of the exchange‬
‭relationships expressed in market prices in order to penetrate the problem of economic‬
‭accounting. To discover this problem—which is one of the most important—it was necessary‬
‭to use one of the means provided by the marginal value of the economy of our time. (1)”‬

‭ on Mises, L. (2007). Socialism: An Economic and Sociological Analysis p.217. Unión‬

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‭Editorial‬

‭ udwig von Mises provides us with two different arguments. The first states that economic‬
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‭calculation is impossible, and the second is the impossibility of directing production without a‬
‭business manager. Ludwig von Mises understands "economic calculation" as "monetary calculation."‬

‭“1. MONETARY CALCULATION AS A METHOD OF THINKING‬

‭ onetary calculation is the guide for action within a social system of division of labor. It‬
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‭becomes the compass that guides man when he embarks on production. Through calculation,‬
‭he can distinguish, among the multiple possible productions, those that are profitable from‬
‭those that are not; those that will surely be appreciated by the sovereign consumer from those‬
‭that are most likely to be rejected. Every stage and every step of productive action must be‬
‭weighed in the light of monetary calculation. The prior planning of action turns into the‬
 c‭ ommercial calculation of expected costs and benefits. The retrospective verification of the‬
‭results of actions taken becomes the accounting of profits and losses.‬

‭ he system of economic calculation in monetary terms is conditioned by the existence of‬

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‭certain social institutions. It is only practicable within the institutional framework of the‬
‭division of labor and private ownership of the means of production, that is, within an order‬
‭under which goods and services are bought and sold against a commonly accepted medium of‬
‭exchange, namely, money.”‬

‭Von Mises, L. (2011). Human Action (p.277). Unión Editorial‬

‭ ises mentions that monetary calculation can only be established based on a social division of labor‬
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‭(this can also be seen in his work Socialism). To establish monetary calculation, a set of social‬
‭relations belonging to the capitalist system of production is required. For this type of calculation, a‬
‭theory of prices and money is necessary. Mises is aware of this, and thus he relies on the theory of‬
‭marginal value.‬

I‭ t was assumed that, through an act of measurement, the value of goods and services‬
‭was established and then exchanged for other goods and services of equal value. This false‬
‭starting point rendered the economic thought of Aristotle sterile, as well as that of all those‬
‭who, for nearly two thousand years, considered Aristotelian ideas definitive. It gravely‬
‭disturbed the great work of the classical economists and deprived the works of their‬
‭successors, especially those of Marx and the Marxist schools, of any scientific interest.‬
‭Modern economics, by contrast, is based on the idea that exchange arises precisely because‬
‭the parties attribute different values to the objects exchanged. People buy and sell solely‬
‭because they value what they give less than what they receive. Hence, any attempt to measure‬
‭value is futile. The act of exchange is not preceded by any process involving the measurement‬
‭of value. If an individual attributes the same value to two things, there is no reason to‬
‭exchange one for the other. However, if they are valued differently, the most that can be said is‬
‭that one of them, a, is valued more, meaning it is preferred over b. Value and valuations are‬
‭intensive expressions, not extensive.‬

‭Von Mises, L. (2011). Human Action (p.247). Unión Editorial‬

‭ apitalists govern the movement of capital. The price structure derived from‬
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‭speculations carried out in money and capital markets, as well as in the major commodity‬
‭exchanges, not only determines how much capital is available to carry out the operations of‬
‭each company, but also creates a state of affairs to which the directors must meticulously‬
‭adjust their actions.‬

‭Von Mises, L. (2011). Human Action (p.371). Unión Editorial‬

‭ or Mises, exchange is carried out based on the subjective preferences of individuals and not on an‬
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‭objective value. This is because, according to Mises, it is impossible to measure utility. Exchange, for‬
‭Mises, occurs when a person values commodity A more than commodity B. This applies to all‬
‭exchanges made in the market.‬

‭ ow does Mises explain prices through the theory of marginal value without relying on the‬
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‭"objectivity" of money? The answer is simple: he cannot do it.‬
 I‭ t is never carried out as when it comes to non-fungible goods. The buyer or seller of‬
‭fungible goods or services sets an arbitrary price, which they then modify according to the‬
‭reaction their offer provokes, until they reach a level that allows them to buy or sell as much‬
‭as they wish. No other method can be used. Large stores cannot haggle with their customers.‬
‭They set the price of an item and wait. Whoever needs five hundred welders establishes the‬
‭wage rate that, in their opinion, should allow them to hire five hundred men. If a smaller‬
‭number appears, they will have no choice but to offer more. The employer must raise the‬
‭wage to reach the limit that prevents competitors from poaching their staff with a higher‬
‭remuneration. Coercively set minimum wages prove to be futile for the precise reason that‬
‭they scare away potential employers who would make the labor supply fully absorbed.‬

‭Von Mises, L. (2011). Human Action (p.909). Unión Editorial.‬

‭ ises presupposes that the price scheme is derived from the market (the free interaction of individuals‬
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‭who subjectively value products). But he cannot prove it. The subjective act precisely presupposes a‬
‭price scheme! The theory of marginal value cannot derive the prices (and along with them, the‬
‭money) used in monetary calculation.‬

‭ ises cannot prove that prices arise from the psychological valuation of individuals in the market.‬
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‭Therefore, monetary calculation, which requires the categories of money and price, cannot be‬
‭grounded in the theory of marginal value. The latter, which is often appealing to those who have not‬
‭truly delved into it, lacks scientific support and cannot solve the problems it itself poses.‬

I‭ n the market, monetary prices appear. Economic calculation is carried out based on them.‬
‭The various quantities of goods and services enter into this calculation with the total amount‬
‭of money that is used—or that can be used in perspective—to buy and sell them in the market.‬
‭It is erroneous to assume that the autarkic and self-sufficient individual or the director of the‬
‭socialist republic, where there is no market for the factors of production, can calculate. No‬
‭formula allows, starting from the typical monetary calculation of a market economy, to‬
‭calculate in an economic system where the market does not exist.‬

‭Von Mises, L. (2011). Human Action (p.277). Unión Editorial.‬

‭ ises mentions that monetary calculation is carried out through market prices. This is correct, but‬
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‭these OBJECTIVE prices can only form under the social division of labor of the capitalist system of‬
‭production. Mises agrees with this last point.‬

‭ OCIAL DIVISION OF LABOR AND PRIVATE PROPERTY => MARKET PRICES =>‬
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‭ECONOMIC CALCULATION‬

I‭ f these branches do not exist, Mises asserts, economic calculation (in the sense of monetary‬
‭calculation) cannot exist. This argument is circular, as it can be reduced to: “Monetary calculation is‬
‭only possible under the categories of the social division of labor and private property (and thus‬
‭capitalist); therefore, monetary calculation is impossible outside these categories.”‬

‭ ises does not consider that Marxism does NOT PROPOSE A MONETARY CALCULATION FOR‬
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‭SOCIALIST SOCIETY. Mises commits ideology by failing to see beyond the categories of the‬
‭capitalist system, believing that the socialist society aims to formulate a plan based on merchant‬
‭economic categories. This is false! Mises cannot conceive of “non-monetary” economic calculation.‬

‭Engels mentions in Anti-Dühring, specifically in the section on Socialism, the following:‬

 (‭ ...) of what a thousand hours of labor are worth. Indeed, society will also need to know how‬
‭much labor is required for the production of each useful object. It will have to establish the‬
‭production plan based on the means of production, among which labor forces are particularly‬
‭notable. The plan will ultimately be determined by comparing the useful effects of the various‬
‭useful objects with each other and with the amounts of labor necessary for their production.‬
‭People do all this quite simply at home, without needing to involve the famous "value."‬

‭Engels, F. (1968). Anti-Dühring (p.307). Grijalbo.‬

‭ t a theoretical level, economic calculation in a socialist society should be carried out, according to‬
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‭Engels, through “the quantities of labor necessary for production” and the “useful effects of the‬
‭various useful objects.” Engels also mentions that this could be done without resorting to “value.”‬

‭ his requires a complex reflection that we will not resolve here, but we will open the door to‬
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‭understanding the landscape. First, we must understand what we mean by “quantities of labor‬
‭necessary” and “useful effects.” Mises complains that it is impossible to calculate prices in socialism,‬
‭ignoring that the essence of socialism is precisely NOT TO USE PRICES.‬

‭ he quantities of labor necessary refer to the amount of time needed to produce a good under certain‬
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‭conditions. Now, this can be expressed objectively in capitalist society through price. However, this‬
‭price could not (following Engels) be the category used for planning. If “value” is not required, then‬
‭“price” and thus money cannot be required either. The absence of value necessarily implies the‬
‭impossibility of the form of value. For Engels, it is necessary to measure the time of labor without‬
‭using price. Therefore, the economic calculation of socialism could not be monetary (as Mises intends‬
‭to suggest to criticize socialism).‬

‭ arx already demonstrated in‬‭Das Kapital‬‭that the‬‭values of use cannot be compared unless the‬
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‭physical qualities of them are abstracted. The “use value” comes in as a main aspect, and this must,‬
‭under the particular conditions present in a developed socialist society (becoming socially useful), be‬
‭compared with the quantities of labor necessary.‬

‭ ere, any reasonable person who does not possess a broad understanding of Marxist economic theory‬
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‭would question: How can this relationship be established without resorting to money and prices?‬

‭ he economies of the USSR and People's China (referring specifically to the governments of Stalin‬
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‭and Mao) oriented their production toward use value, the satisfaction of needs (the useful aspect), but‬
‭ultimately, the calculation was still carried out through prices. That is, the less developed socialist‬
‭countries failed to achieve a non-monetary calculation (and if it were to exist), it was quantitatively‬
‭lesser compared to monetary calculation. The persistence of commodity production at the time of‬
‭establishing relationships between the countryside and the city is that social relationship (a remnant of‬
‭capitalism) that does not allow for the possibility of non-monetary calculation. Therefore, the USSR‬
‭and People's China were unable to go beyond monetary calculation (sustained by internal commodity‬
‭production, and thus Mises's critique would not apply).‬

‭ nce this question is answered, there remains one final question regarding it: How can non-monetary‬
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‭calculation be carried out?‬

‭ ecause we cannot escape through consciousness from our historical-productive limits, it is too‬
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‭complex (if not impossible) to speak of future production relationships. This can only be achieved‬
‭ hen socialist production fully develops. The cognitive limits of this problem reside in the fact that‬
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‭capitalist remnants remained active during the socialist experiences (these were their historical limits).‬

‭Mao Tse Tung leaves us with the following lesson:‬

‭ metaphysical conception is adopted if one thinks that it is unnecessary, in order to‬

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‭understand the respective importance of each sector of the Plan, to go through a process,‬
‭compare successes and failures, and follow a tortuous path. Freedom is the understood‬
‭necessity. But, evidently, it cannot be grasped at a glance. There are no innate wise people in‬
‭the world. Even in a socialist society, one does not become a "visionary." Why did the current‬
‭Mamua not come out faster? Why, once published, has it undergone repeated revisions? Isn’t‬
‭it because there was insufficient knowledge in the past and because even today we do not‬
‭have perfect knowledge? Let’s take the example of our own experiences. At the beginning, we‬
‭did not understand what socialism was. Later, through practice, we gradually acquired‬
‭knowledge, a certain knowledge, but not sufficient knowledge. If we had sufficient knowledge,‬
‭we would have nothing more to do.‬

‭ se Tung, Mao. (1975). Unpublished Writings: Philosophy, Economics, and Politics (p.70).‬
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‭Lima SA.‬

‭With all my love to Naifu‬

‭- Leni‬