mises - September 28: Notes on Mises Economic Calculation...

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September 28: Notes on Mises’ “Economic Calculation in the Socialist Commonwealth” Summary Page 17: “Socialism is the abolition of rational economy.” Introduction Economics of the Bourgeois society: Marx, Engels etc provide lots of criticism of the present state of affairs, but no description of the workings of the future socialist economy. Utopian pictures of commune states provide little insight as to how this utopia will be achieved. Distribution of Consumption Goods All property belongs to the community, which decides how to make use of it (decisions are executed by some governing body, perhaps through democratic elections). How to distribute production among the population becomes a central question in such a society: as we will see, one cannot pay workers according to value of work because it is impossible to see how much he/she contributed. The problem lies in communal ownership of production goods (see Page 4 ), Let’s assume consumption goods are distributed on the basis of equality: people are divided into groups (age, sex, health etc) and everyone within a group receive an equal amount of coupons that they can exchange for food, drink etc. After people redeem their coupons, they will want to exchange some things for others. Hence, money naturally arises in
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the economy. Note that exchanged material is limited to consumption goods; production goods are owned communally. Hence ( NOTE ), monetary value of production goods will never be established. Exchange interactions will establish relative values of consumption goods (e.g. 1 cigar=5 cigarettes) and the administration must observe these relative prices in their distribution policy. For example, if for the same tobacco ticket someone gets 1 cigar and someone else 3 cigarettes, then the latter was treated unequally. The state should also keep exchange relations in mind when deciding on production targets: goods in greater demand should be produced more than those in smaller demand. It should be emphasized that the state cannot let individuals decide the value of a tobacco ticket in terms of cigars and cigarettes; how can they know? The exchange value is what’s important here. Distribution from the point of view of labor theory of value (roughly): value of a good can be measured by the amount of labor put in, including labor invested in production of capital. Applying this to our imaginary economy, we can try to measure how much labo r goes into producing good x and pay workers accordingly, so that “he who has put in an hour’s
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This note was uploaded on 12/29/2010 for the course ECON 4313 taught by Professor Staff during the Fall '08 term at Minnesota.

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mises - September 28: Notes on Mises Economic Calculation...

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