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A critique of its assumptions
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The basic argument of the ECA
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A critique of its assumptions
The ECA argument rests on three flawed assumptions, two against communism and one for capitalism. The first two negative assumptions are that communism entails central planning and that it is impossible to make investment decisions without money values. The other assumption is that capitalist markets allow exact and efficient allocation of resources.
Communism can be decentralised
Mises argued that without money there was no way a socialist economy would make "rational" production decisions. Not even Mises denied that a moneyless society could estimate what is likely to be needed over a given period of time (as expressed as physical quantities of definite types and sorts of objects). As he argued,
in an economy without exchange can embrace consumption-goods only."
His argument was that the next step, working out which productive methods to employ, would not be possible, or at least would not be able to be done "rationally," i.e. avoiding waste and inefficiency. The evaluation of producer goods
"can only be done with some kind of economic calculation. The human mind cannot orient itself properly among the bewildering mass of intermediate products and potentialities without such aid. It would simply stand perplexed before the problems of management and location."
Thus we would quickly see
"the spectacle of a socialist economic order floundering in the ocean of possible and conceivable economic combinations without the compass of economic calculation."
"Economic Calculation in the Socialist Commonwealth"
, pp. 87-130,
Collectivist Economic Planning
, F.A. von Hayek (ed.), p. 104, p. 103 and p. 110] Hence the claim that monetary calculation based on market prices is the only solution
As Hayek summarised, the crux of the matter was
"the impossibility of a rational calculation in a centrally directed economy from which prices are necessarily absent"
, one which
"involves planning on a most extensive scale -->. Thus the
"one central authority has to solve the economic problem of distributing a limited amount of resources between a practically infinite number of competing purposes"
"a reasonable degree of accuracy, with a degree of success equally or approaching the results of competitive capitalism"
"constitutes the problem of socialism as a method." ["The Nature and History of the Problem"
, p. 35, p. 19 and pp. 16-7]
While this was a common idea in Marxian social democracy (and the Leninism that came from it), centralised organisations are rejected by anarchism. As Bakunin argued,
"where are the intellects powerful enough to embrace the infinite multiplicity and diversity of real interests, aspirations, wishes, and needs which sum up the collective will of the people? And to invent a social organisation that will not be a Procrustean bed upon which the violence of the State will more or less overtly force unhappy society to stretch out?"
Moreover, a socialist government,
"unless it were endowed with omniscience, omnipresence, and the omnipotence which the theologians attribute to God, could not possibly know and foresee the needs of its people, or satisfy with an even justice those interests which are most legitimate and pressing."
Bakunin on Anarchism
, pp. 268-9 and p. 318] For Malatesta, such a system would require
and would either be
"an impossible thing to achieve, or, if possible, would end up as a colossal and very complex tyranny."
At the Café
, p. 65]
Kropotkin, likewise, dismissed the notion of central planning as the
"economic changes that will result from the social revolution will be so immense and so profound . . . that it will be impossible for one or even a number of individuals to elaborate the social forms to which a further society must give birth. The elaboration of new social forms can only be the collective work of the masses."
Words of a Rebel
, p. 175] The notion that a
"strongly centralised Government"
that a prescribed quantity"
of a good
"be sent to such a place on such a day"
"received on a given day by a specified official and stored in particular warehouses"
was not only
During his discussion of the benefits of free agreement against state tutelage, Kropotkin noted that only the former allowed the utilisation of
"the co-operation, the enthusiasm, the local knowledge"
of the people. [
The Conquest of Bread
, pp. 82-3 and p. 137]
Kropotkin's own experience had shown how the
of the Tsarist bureaucracy
"were simply charming in their innocent ignorance"
of the areas they were meant to be administrating and how, thanks to Marxism, the socialist ideal had
"lost the character of something that had to be worked out by the labour organisations themselves, and became state management of industries -- in fact, state socialism; that is, state capitalism."
As an anarchist, he knew that governments become
"isolated from the masses"
"the very success of socialism"
"the ideas of no-government, of self-reliance, of free initiative of the individual"
"preached side by side with those of socialised ownership and production."
Thus it was essential that socialism was decentralised, federal and participatory, that the
"structure of the society which we longed for"
"worked out, in theory and practice, from beneath"
"all labour unions"
"a full knowledge of local needs of each trade and each locality."
Memoirs of a Revolutionist
, p. 184, p. 360, p. 374-5 and p. 376]
So anarchists can agree with Mises that central planning cannot work in practice as its advocates hope. Or, more correctly, Mises agreed with the anarchists, as we had opposed central planning first. We have long recognised that no small body of people can be expected to know what happens in society and plan accordingly (
"No single brain nor any bureau of brains can see to this organisation."
, p. 29]). Moreover, there is the pressing question of freedom as well, for
"the despotism of [the 'socialist'] State would be equal to the despotism of the present state, increased by the economic despotism of all the capital which would pass into the hands of the State, and the whole would be multiplied by all the centralisation necessary for this new State. And it is for this reason that we, the Anarchists, friends of liberty, we intend to fight them to the end."
"Anarchy and Communism"
, pp. 179-86,
, No. 6, p. 179]
As John O'Neill summarises, the
"argument against centralised planning is one that has been articulated within the history of socialist planning as an argument for democratic and decentralised decision making."
, p. 132] So, for good economic and political reasons, anarchists reject central planning. This central libertarian socialist position feeds directly into refuting Mises' argument, for while a
system would need to compare a large (
) number of possible alternatives to a large number of possible needs, this is not the case in a
system. Rather than a vast multitude of alternatives which would swamp a centralised planning agency, one workplace comparing different alternatives to meet a specific need faces a much lower number of possibilities as the objective technical requirements (use-values) of a project are known and so local knowledge will eliminate most of the options available to a small number which can be directly compared.
As such, removing the assumption of a central planning body automatically drains Mises' critique of much of its force -- rather than an
"the ocean of possible and conceivable economic combinations"
faced by a central body, a specific workplace or community has a more limited number of possible solutions for a limited number of requirements. Moreover, any complex machine is a product of less complex goods, meaning that the workplace is a consumer of other workplace's goods. If, as Mises admitted, a customer can decide between consumption goods without the need for money then the user and producer of a
good can decide between consumption goods required to meet their needs.
In terms of decision making, it is true that a centralised planning agency would be swamped by the multiple options available to it. However, in a decentralised socialist system individual workplaces and communes would be deciding between a much smaller number of alternatives. Moreover, unlike a centralised system, the individual firm or commune knows exactly what is required to meet its needs, and so the number of possible alternatives is reduced as well (for example, certain materials are simply technically unsuitable for certain tasks).
Communism involves the communication of information
Mises' other assumption is equally flawed. This is that without the market, no information is passed between producers beyond the final outcome of production. In other words, he assumed that the final product is all that counts in evaluating its use. Needless to say, it is true that without more information than the name of a given product it is impossible to determine whether using it would be an efficient utilisation of resources. Yet more information can be provided which can be used to inform decision making. As socialists Adam Buick and John Crump point out,
"at the level of the individual production unit or industry, the only calculations that would be necessary in socialism would be calculations in kind. On the one side would be recorded the resources (materials, energy, equipment, labour) used up in production and on the other the amount of good produced, together with any by-products. . . . Socialist production is simply the production of use values from use values, and nothing more."
State Capitalism: The Wages System Under New Management
, p. 137]
Thus any good used as an input into a production process would require the communication of this kind of information.
The generation and communication of such information implies a decentralised, horizontal network between producers and consumers. This is because what counts as a use-value can only be determined by those directly using it. Thus the production of use-values from use-values cannot be achieved via central planning, as the central planners have no notion of the use-value of the goods being used or produced. Such knowledge lies in many hands, dispersed throughout society, and so socialist production implies decentralisation. Capitalist ideologues claim that the market allows the utilisation of such dispersed knowledge, but as John O'Neill notes,
"the market may be one way in which dispersed knowledge can be put to good effect. It is not . . . the only way"
"The strength of the epistemological argument for the market depends in part on the implausibility of assuming that all knowledge could be centralised upon some particular planning agency"
he stresses, but Mises'
"argument ignores, however, the existence of the decentralised but predominantly non-market institutions for the distribution of knowledge . . . The assumption that only the market can co-ordinate dispersed non-vocalisable knowledge is false."
, p. 118 and p. 132]
It is useful to remember that Mises argued that it is the
of a modern economy that ensures money is required:
"Within the narrow confines of household economy, for instance, where the father can supervise the entire economic management, it is possible to determine the significance of changes in the processes of production, without such aids to the mind [as monetary calculation], and yet with more or less of accuracy."
"the mind of one man alone -- be it ever so cunning, is too weak to grasp the importance of any single one among the countlessly many goods of higher order. No single man can ever master all the possibilities of production, innumerable as they are, as to be in a position to make straightway evident judgements of value without the aid of some system of computation."
, p. 102]
A libertarian communist society would, it must be stressed, use various
"aids to the mind"
to help individuals and groups to make economic decisions. This would reduce the complexity of economic decision making, by allowing different options and resources to be compared to each other. Hence the complexity of economic decision making in an economy with a multitude of goods can be reduced by the use of rational algorithmic procedures and methods to aid the process. Such tools would aid decision making, not dominate it as these decisions affect humans and the planet and should never be made automatically.
That being the case, a libertarian communist society would quickly develop the means of comparing the real impact of specific
goods in terms of their real costs (i.e. the amount of labour, energy and raw materials used plus any social and ecological costs). Moreover, it should be remembered that production goods are made up on inputs of other goods, that is, higher goods are made up of consumption goods of a lower order. If, as Mises admits, calculation without money is possible for consumption goods then the creation of
goods can be also achieved and a record of its costs made and communicated to those who seek to use it.
While the specific
"aids to the mind"
as well as "costs" and their relative weight would be determined by the people of a free society, we can speculate that it would include direct and indirect labour, externalities (such as pollution), energy use and materials, and so forth. As such, it must be stressed that a libertarian communist society would seek to communicate the "costs" associated with any specific product as well as its relative scarcity. In other words, it needs a means of determining the objective or absolute costs associated with different alternatives as well as an indication of how much of a given good is available at a given it (i.e., its scarcity). Both of these can be determined without the use of money and markets.
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