Preface

During the last few decades, criticism has been directed at "value judgments" and "hidden political and ethical assumptions" in economics. I agree that. such assumptions should be stated. Thus, although the problem of economic calculation in socialist societies is one that it should be possible to discuss objectively irrespective of one's political views, I wish to say here that my original sympathy for socialist ideals has given place to an ever-growing doubt as. to the political, cultural and economic consequences of socialism. I hope and believe, however, that this scepticism has not made my arguments illogical, nor my conclusions worthless. In the text, I have made no reference to existing socialist societies such as Soviet Russia, as reference to this country often seems to introduce emotional elements into a discussion. However, in Appendix C I have attempted to compare the actual developments in Soviet Russia with the conclusions I have deduced.

In Appendix A non-economists will find a short description of a market economy. In Appendix B is given an enumeration of objections made against (private) capitalism, and a brief subjective assessment of their validity. In this appendix is also discussed how far these alleged defects may conceivably be eliminated in socialist societies. The translation into English has been delayed owing to the war, but except for a few minor corrections the English edition is identical with the Norwegian, which appeared in 1938. TRYGVE ]. B. HOFF. v TRANSLATOR'S NOTE My grateful thanks are due to Mrs. Vera Lutz and to Dr. Arthur Birnie for their invaluable guidance through the maze of economic terminology. M.A.M. vi CONTENTS CHAPTER PAGE I. Statement of the Problem-Earlier Treatment of the Subject-Possibility of" Objective" Discussion I II. Definitions and Assumptions I I III. Procedure-Additional Assumptions-The Aim of Social Economic Activity 2 2 IV. Calculation in Socialist Societies with a Natural Economy . 32 .V. The Possibility of Economic Calculation in Marxist Communist Communities 52 VI. Money and the Formation of Prices of Consumer Goods in a Socialist Society with Free Choice of Goods and Occupation 65 VII. Reserves, Profit and Risk in the Socialist State . 82 VIII. Interest in the Socialist Society 9I IX. Rent in the Socialist Society 120 X. Depreciation in the Socialist Society . 125 XI. Mises' Theory-Proposed Solutions: Mathematical Solutions and the "Experimental Method" 129 XII. Other Solutions: Marginal Costs as Criteria 144 XIII. Other Suggested Solutions: Competition in the Socialist Community 153 XIV. Economic Calculation in a Socialist Society where there is Free Choice of Goods or Occupation. 166 XV. Resume and Conclusions. 185 ApPENDICES A. The Price Mechanism in a Private· Capitalist Society 191 B. Alleged Defects of Capitalist Societies and the Chances of eliminating them in Socialist Societies 201 C. A Comparison between deduced Conclusions and Experiences in Soviet Russia 220 BIBLIOGRAPHY • 252 INDEX 259 vii I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I I CHAPTER I STATEMENT OF THE PROBLEM-EARLIER TREATMENT OF THE SUBJECT-POSSIBILITY OF "OBJECTIVE" DISCUSSION DISCUSSION OF the feasibility of practical socialism has so far been mainly confined to its ethical and psychological aspects. The more technical question of the possibility of economic calculation under socialism, though not entirely neglected, has received relatively little attention. As early as 1854 the German pioneer of the theory of marginal utility, H. H. Gossen, declared that only private ownership could give a yardstick for determining how much might suitably be produced of different goods according to existing resources. l Professor Vilfredo Pareto broached the question on several occasions,2 and in 1902 the Dutch economist N. G. Pierson wrote in a polemic3 against Karl Kautsky that even a socialist society will have its value problems and that the socialists will have to show how they are going to have a price system. In 1904 Professor Maurice Bourguin 4 criticized the socialist economy and drew attention to a number of the difficulties which existed. In 1908 the Italian Professor Enrico ~arone treated the problem from the mathematical aspect along the lines indicated by Pareto. 5 The problem was touched on in 1919 by Dr. O.