Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered

by Don Lavoie

This study represents a serious challenge to conventional thinking in contemporary comparative systems, and the economics of socialism. It disputes the commonly accepted view of both the nature of the 'socialist calculation debate' of the 1930s and the lessons to be derived from it. Whereas many socialist and capitalist participants to the debate tended to talk in polar terms of central planning versus the market, the chief result of the whole controversy has been that the Neoclassical 'market-socialist' position is usually taken to represent a successful synthesis of planning with markets, a synthesis which almost completely dominates contemporary work in comparative economic systems. The author argues in fact that the famous debate has been largely misunderstood. His revisionist interpretation argues that it can no longer be viewed as a dated battle between extreme positions that have now become comfortably reconciled. Rather, the lesson is that planning and markets are fundamentally alternative co-ordination mechanisms and that the attempt to combine them tends to subvert the operation of each.

Genres: Economics

224 pages, Hardcover

First published May 31, 1985

Reviews

[Louis · Rating 4 out of 5]

Lavoie is my favorite Austrian economist so far, he is intellectually honest, knows his Marx and is acquainted with the Marxist tradition. I don't think you will find a lot of Austrians who discuss Kozo Uno's interpretation of Marx. This book, and his other book on national economic planning, is a must for socialists, progressives and Marxist to engage with.

[Otto Lehto · Rating 4 out of 5]

Written with stellar clarity, Lavoie's re-examination of the Socialist Calculation Debate is both historically interesting and forward-looking in its confident reassertion of the modern Austrian perspective. Sure, it doesn't bring much new to the table, since it relies exclusively on the Mises-Hayek argument, but it surveys the scene with competence and plants its flag with bravado.

The central argument of the book is that the Austrian theory of the competitive market process, which allegedly underlies both Mises's and Hayek's theses in the debate, is a dynamic process theory of change that cannot be captured by neoclassical equilibrium models based on static assumptions of given knowledge, given technologies, given resource availability, etc. The failure of socialist calculation depends upon a fuller understanding of the role of entrepreneurship and institutions in managing risk, uncertainty, dynamic change, complex adaptation, etc. According to the author, the failure of the market socialists to fully understand the theory, and the failure of the Austrians to fully articulate it, led to a general state of impasse in the historical debate.

For the most part, the author does a pretty good job explaining all sides of the argument despite his professed love of and commitment to the Austrian cause. But I will subtract one star for the excessively generous treatment by which the author handles the Austrian side of the argument according to which they were always one step ahead of the opposition and never strayed from the one true path. The flip-side of this, of course, is the author's ungenerous treatment of the other side (although curiously not of Marx, who is given a VERY generous reading as a fellow disequilibrium theorist against the neoclassical mainstream!). This is reflected in the book's failure, in the middle act, to make a convincing positive case for the market socialist argument.

This, however, is the only major shortcoming in an otherwise excellent and clear treatise. The book is a very good introduction to and summary of the debate from the Austrian side.

[Isadore Johnson · Rating 5 out of 5]

Good stuff. I'm taking a class on Austrian economics as an independent study. I know I'm predisposed to ideas that seem libertarian-ish, and I like the novelty of interesting, new arguments.

Thoughts:
I think the recontextualization of the calculation debate is an interesting thing to devote resources too. It's not really something I've learned much about in my other economics classes. I'm not really sure why, but reading this, and its foil, the standard account, are interesting.

I think the book was pretty generous to Marx, and intellectual generosity is something to be valued, and something that I think made this book a page turner.

I also enjoyed the chapter on Mises because it gives something in between a birds eye view, and getting too stuck in the weeds.

[Kristian · Rating 5 out of 5]

"This does not, however. reduce to the mere question of "incentives" in the narrow sense of psychological motivation. The "incentives" of the profit and loss system do not merely motivate action; they inform it." This is a fantastic book, but make sure you have a good ground in Austrian capital theory. I would also read The Capitalist and The Entrepreneur by Peter G. Klein. Don Lavoie fills the reader in where they may feel wanting upon reading Economic Calculation in the Socialist Commonwealth (Mises' original work still needs to be read).

[Dave Burns · Rating 5 out of 5]

Lavoie performs a minor miracle by revising this intellectual history of the socialist calculation debate while fascinating the reader. He makes a strong case that historians of thought have misinterpreted the debate.

If you don't have time to read the book, just read the last chapter. It provides a beautiful summary of Lavoie's argument in only 5 pages. If you do, you may change your mind and start at the beginning. Lavoie writes clearly and illustrates the difference between the sterile formalisms of contemporary neoclassical economics and the emphasis on dynamic change that characterized Mises' and Hayek's contributions to the debate.