This is addressed to my fellow
professional economists, but may be of interest to some lay readers as well.
With Socialism once again respectable,
Ludwig von Mises’s classic devastating critique reemerges as highly
relevant. Rereading Mises’s Human Action version, two interesting points
struck me.
As is well known, he isolates
the-knowledge problem from the incentive-problem and focuses on the former, the
impossibility of acquiring the necessary knowledge for deciding how to allocate
resources to produce known ends. Such knowledge can exist only as the result of
a market process.
1.
The fact that *ends are given and known* is
important. Mises explicitly accepts the 'value judgements' of the
decison-maker(s), the socialist planning committee for example. His argument is
not that they would choose to produce the wrong things, but, rather, that even
if we suspend judgment on this, we can show that they would be incapable of
effectively producing according to their own values. This makes it a praxeological
(logical) rather than a historical (empirical) argument.
2. I did not see Mises explicitly make
this argument, but his setup also implies that if we had a completely
benevolent dictator, fully and genuinely committed to the 'public good', who
also clearly understood the knowledge-problem and the impossibility of
capital-accounting under a socialized system, he would attempt to establish a
market economy by guaranteeing private property protections and the rule of
law. In other words, he would abandon socialism. Benevolence or understanding
or both must go if we are to explain the persistence of the socialist dictator
or presidential candidate.
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