Liberty Matters

On the Robustness of Mises’s Calculation Argument


Another way to think about how much we can rely on mere theorizing about interventionist dynamics is to ask how robust the Austrian critique of pure collectivism is.
As I noted in an earlier comment, the economic collapse of the USSR and its final dissolution in 1991 does not vindicate that critique – that occurred back in 1921 – but rather corroborates Mises’s critique of interventionism, because the USSR after 1921 (with perhaps the exception of World War II) was simply a highly interventionist mixed economy.
But think of Mises’s critique of pure collectivism as a kind of impossibility theorem:  An economic system in which all means of production are completely collectively controlled would render rational economic calculation impossible, the practical implication of the theorem being that pure collectivism would as a result be both unworkable and unsustainable (though not contradictory the way interventionism is).
If we accept Jeremy’s characterization of Mises’s impossibility theorem as methodologically sound, we might then ask what happens if we relax some of its assumptions:  To what degree would relaxing complete collective control over all the means production render Mises’s argument against pure collectivism inapplicable?  It seems reasonable to assume that the impossibility theorem becomes weaker the farther the system departs from pure collectivism, and stronger the closer it comes to pure collectivism.  Hence, predictions about the highly interventionist USSR (or perhaps contemporary North Korea) are more reliable than predictions about U.S.-style interventionism.  The particular shape of the system’s trajectory between laissez-faire capitalism and pure collectivism is of course still the issue.
(Seen in this light, Mises’s strong statements about the end of interventionism and so on are perhaps understandable if (1) he detected a strong empirical tendency for public choosers to push relentlessly for ever more intervention and (2) as the mixed economy gets closer to pure collectivism, the forces outlined in his impossibility theorem grow much stronger, and so the less workable and sustainable the system becomes.)
I argued in my 1997 book and elsewhere that Mises’s impossibility theorem (I did not use that term there) is indeed robust in the sense that in a system of, say, 90 percent control over 90 percent of all means of production would still make rational economic calculation impossible and result in a system that is still unworkable and unsustainable.  Lenin’s grip on the “commanding heights” under his New Economic Policy represented an even more radical departure from the earlier period of collectivist “war communism.” How valid are Interventionist Dynamics – which encounter the same kinds of problems as pure collectivism though in less extreme form – under those circumstances?