by Mark Brandly
The Importance of Economic Calculation
In “Economic Calculation in the Socialist Commonwealth,” Ludwig von Mises challenged the socialists to explain how economic calculation could be performed in a socialist economy absent prices. Mises concluded that economic calculation in a socialist economy is impossible, therefore socialism is impossible.
Mises wasn’t saying that you couldn’t have a socialist society, he was saying that it’s not an economy, in the sense that decision makers are economizing regarding their decisions about the allocation of resources.
Socialism, at the time, was defined as a system where the state owns the means of production. The state owns the natural resources and the capital, such as the factories necessary for use in the production process. Given this state ownership, the resources are not being traded in any market and since there are no markets for the resources there are also no market prices for the resources.