The Socialist Calculation Debate

Market prices allow unplanned capitalist economies to accomplish rational allocation by providing a common denominator to compare the many different inputs and outputs in an economy.

Steven Horwitz

Steven Horwitz is Economics Editor at Lib​er​tar​i​an​ism​.org and Distinguished Professor of Free Enterprise at Ball State University. Horwitz has written extensively on Austrian economics, Hayekian political economy, monetary theory and history, and macroeconomics.

Summary:

In Ludwig von Mises’s essay “Economic Calculation in the Socialist Commonwealth,” he argued that socialist planned economies could not work because they lacked a way to rationally allocate resources. Market prices allow unplanned capitalist economies to accomplish rational allocation by providing a common denominator to compare the many different inputs and outputs in an economy.