Chapter XI

CHAPTER XI MrSES' THEORY. PROPOSED SOLUTIONS: MATHEMATICAL SOLUTIONS AND THE " EXPERIMENTAL METHOD" THE THREE previous chapters have been concerned with various factors which the central authority in the socialist society must include in its calculations and accounting if "the economic principle" is to be followed. These factors all had one thing in common; they were either difficult, or impossible, to determine without prices for the means of production. If it should be impossible in the socialist society to put prices on means of production, this will entail other and far more serious con sequences than that these factors can not be measured. Unless there are prices for the means of production the economic activity of any modern, industrialized community will be haphazard. Without such prices the central authority will lack the necessary data to· determine how and. in what combination the various means of production can be put to the optimum economic use. Nor will it be able to follow the fundamental law that should govern allecononUc activity, namely that the result varies according to the different combinations of production factors. 1 Without prices to indicate their scarcity, those means of production which exist only in limited numbers and quantity (in the society or place concerned) could be used for purposes that are without im portance in relation to the given end, with the result that more im portant aims could not be achieved. Without prices for means of production the central authority will have no data for determining whether the contribution and the sacrifice are greater or smaller than the result. Without them calculation is impossible, and without calculation there can be no rational conduct, nor any rational use of the community's resources. On the whole, all who have taken part in this discussion are agreed that prices for means of production are necessary IThis view may cause surprise, since the increasing and diminishing yields resultirig from such attempted combinations are, in theoretic discussion, generally measured in natura and expressed in units of quantity of one of the production factors or of the final product. Economic calculation, however, demands prices, prices that are commensurable and express the relative scarcity of the means of production in relation to its various possible uses and the different combinations.

See also Professor Ragnar Frisch's Inledning til produfe.sjonsteorien(Stencil), Oslo, 1937, and Professor George M. Peterson's DiminishingReturn and PlannedEcono",-v, New York, 1937.