Information and Economics: A Critique of Hayek

[macfadden]

Information and Economics: A Critique of Hayek

Outlines Hayek's false assumptions, and points out problems of market capitalist economic miscalculation.

Libertarians frequently resort to the "socialist calculation problem" as a blanket denial that socialism could work well. Yet we are surrounded with counterexamples, such as the decentralized socialist public school system, or highly centralized capitalist enterprises such as WalMart. This critique helps us understand why Hayek's arguments should be considered little better than propaganda now.

Quote:Neither the theoretical arguments put forward in the West, nor the fact of the collapse of Soviet socialism, historic landmark as it undoubtedly is, warrant the belief that socialist economic planning tout court is an untenable notion whose time has passed. Indeed, modern developments in information technology open up the possibility of a planning system that could outperform the market in terms of efficiency (in meeting human needs) as well as equity.

Information and Economics: A Critique of Hayek Allin F. Cottrell Wake Forest University and W. Paul Cockshott University of Strathclyde October, 1994 1 introduction

Robin Hahnel: Case Against Markets Youtube

Paul Cockshott - Towards a new Socialism (1/3)
Paul Cockshott - Towards a new Socialism (2/3)
Paul Cockshott - Towards a new Socialism (3/3)

[R.R]

Quote: Yet we are surrounded with counterexamples, such as the decentralized socialist public school system, or highly centralized capitalist enterprises such as WalMart.

Socialism is rooted in Marxism which is rooted in Hegelianism.

Marxists assumed that socialism was inevitable as it arose as an antithesis to the thesis of capitalism.

What they forgot was synthesis meaning a merger between the two.

All part of the plan.

If capitalism, according to Marxists, creates monopolies and empires, why do they advocate centralised control of virtually everything in the hands of the state? Is that not the creation of the ultimate monopoly? Now we see why 'capitalists' fund socialism.

[CharliePrime]

(11-17-2012 01:18 PM)macfadden Wrote:  Libertarians frequently resort to the "socialist calculation problem" as a blanket denial that socialism could work well. Yet we are surrounded with counterexamples, such as the decentralized socialist public school system, or highly centralized capitalist enterprises such as WalMart.

You don't seem to know what the ECP actually refers to.

It's about the price mechanism, not centralization.

[macfadden]

Sorry Charlie but you don't seem to know what the hell you're talking about. The ECP is exactly about central planning, that's all it is about, it isn't about anything else in fact. You should really try to refrain from correcting others on matters in which you yourself only hold the vaguest and foggiest of mistaken notions.

Quote:The economic calculation problem is a criticism of central economic planning. It was first proposed by Ludwig von Mises in 1920 and later expounded by Friedrich Hayek. The problem referred to is that of how to distribute resources rationally in an economy. The free market solution is the price mechanism, wherein people individually have the ability to decide how a good or service should be distributed based on their willingness to give money for it. The price conveys embedded information about the abundance of resources as well as their desirability which in turn allows, on the basis of individual consensual decisions, corrections that prevent shortages and surpluses; Mises and Hayek argued that this is the only possible solution, and without the information provided by market prices socialism lacks a method to rationally allocate resources. Those who agree with this criticism argue it is a refutation of non-market socialism and that it shows that a fully planned economy could never work. The debate raged in the 1920s and 1930s, and that specific period of the debate has come to be known by economic historians as The Socialist Calculation Debate.

Ludwig von Mises argued in Economic Calculation in the Socialist Commonwealth that the pricing systems in socialist economies were necessarily deficient because if a public entity owned all the means of production no rational prices could be obtained for capital goods as they were merely internal transfers of goods and not "objects of exchange," unlike final goods. Therefore, they were un-priced and hence the system would be necessarily inefficient since the central planners would not know how to allocate the available resources efficiently. This led him to declare "...that rational economic activity is impossible in a socialist commonwealth."

Mises developed his critique of socialism more completely in his 1922 book Socialism, an Economic and Sociological Analysis.

Central planning has been criticized by socialists who advocated decentralized mechanisms of economic coordination, including Leon Trotsky and Peter Kropotkin before the Austrian school critique, and later by Janos Kornai and Alec Nove. Leon Trotsky argued that central planners would not be able to respond effectively to local changes in the economy because they operate without meaningful input and participation by the millions of economic actors in the economy, and would therefore be an ineffective mechanism for coordinating economic activity.
http://en.wikipedia.org/wiki/Economic_ca...on_problem

lol @ CharliePrime pretending to know what he is talking about.

[CharliePrime]

(11-23-2012 12:12 PM)macfadden Wrote:  The ECP is exactly about central planning, that's all it is about, it isn't about anything else in fact.

I honestly do not understand how a person could read what you quoted above and not understand that the ECP refers to the price mechanism.

Example: In socialist economic planning toothbrushes are manufactured and distributed based upon what a bureaucrat central planner decides is the appropriate amount and quality.

In a market economy the people who use the toothbrushes decide how many, and of what quality should be produced, and how valuable they are in relation to other products via the price mechanism.

Both situations feature central planning like the planning Walmart employs to get the toothbrushes from manufacturer to consumer, but in the second case price determines how and how many resources are dedicated to toothbrushes, not political concerns.

This is basic economic theory you would learn during an entry-level sophomore economics class. If you don't believe me, I challenge you to sign up on the Mises forum at http://mises.org/community/forums/ and submit your thesis for consideration there. I doubt you will avail yourself of that resource, but doing so would greatly increase your understanding of economics.

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You don't even have to sign up. Here are relevant topics for your study...

http://www.google.com/search?q=%22calcul...y%2Fforums

[macfadden]

(11-23-2012 03:32 PM)CharliePrime Wrote:  

(11-23-2012 12:12 PM)macfadden Wrote:  The ECP is exactly about central planning, that's all it is about, it isn't about anything else in fact.

I honestly do not understand how a person could read what you quoted above and not understand that the ECP refers to the price mechanism.

I do question your honesty, it seems to me that you made an ill conceived criticism based on minced terms and split hairs and now you are grasping at straws in an obvious yet clumsy attempt to save face.


"The problem referred to is that of how to distribute resources rationally in an economy. " An understanding of the price mechanism is necessary to gain an understanding of Mises' criticism, but the problem is not about the price mechanism, the price mechanism is Mises' recommended solution to the problem. So the price mechanism does feature in the ECP but EC is only a P for central planners of non-market economies that do not make use of a price mechanism by any means(according to Mises anyway).

(11-23-2012 03:32 PM)CharliePrime Wrote:  This is basic economic theory you would learn during an entry-level sophomore economics class.

I agree, it's rather elementary. But I guess some have trouble grasping even the most simple and obvious of concepts.

(11-23-2012 03:32 PM)CharliePrime Wrote:  If you don't believe me, I challenge you to sign up on the Mises forum at http://mises.org/community/forums/ and submit your thesis for consideration there. I doubt you will avail yourself of that resource

I doubt I will either, especially if this is the place where you acquired your economic expertise.

[CharliePrime]

hahhaha. Says the guy who thinks Wal-Mart is an example of socialism "working well" and that public schools are decentralized.

Carry on Don Quixote.

[macfadden]

(11-23-2012 03:32 PM)CharliePrime Wrote:  I honestly do not understand how a person could read what you quoted above and not understand that the ECP refers to the price mechanism.

By your logic we could still leave the price mechanism out of it all together and say that ECP refers to calculation in kind which is another alternative to the price mechanism solution. You really are way off, way way off, way way way way, way way way way way way way way wahaaaaay off.

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(11-23-2012 06:59 PM)CharliePrime Wrote:  hahhaha.
Says the guy who thinks Wal-Mart is an example of socialism "working well" and that public schools are decentralized.

Carry on Don Quixote.

Another mindless outburst.

I don't think it was ever claimed that Wal-Mart is an example of socialism.

Some public schools, such as charter schools, are decentralized.

I'm not the quixotic imbecile advocating for pure unconstrained capitalism. I'm in favor of the highly practical and sensible mixed economy.