‘Men of good will, will be called upon to use the power of government to solve our problems of all the social ills: poverty, ignorance, squalor. We as economists are entrusted with these tools and with this now power to be able to achieve that.’
~Paul Samuelson
In this episode, Peter Boettke of George Mason University joins host Russ Roberts to delve into the historical and contemporary relevance of the socialist calculation debate. The discussion reminds us why a centrally planned economy can allocate resources as efficiently as a market-based system, but raises more questions about the debate’s resurgence today.
The conversation begins with Boettke recounting Ludwig von Mises‘s 1920 critique of socialism, where he argued that without market prices for capital goods, rational economic calculation is impossible. He then walks listeners through Friedrich Hayek‘s subsequent expansion on Mises’s ideas, in which he emphasized the dispersed nature of knowledge and how market prices communicate information necessary for efficient resource allocation.
Following these seminal contributions, economists like Oskar Lange and Abba Lerner proposed models of market socialism, suggesting that central planners could simulate market outcomes through trial-and-error pricing. Boettke and Roberts then turn how the debate remains relevant today; what once may have been considered an “archaic academic debate,” has risen anew, particular with the advent of technologies like artificial intelligence.
Below are some questions that occurred to me that I hope might spark conversation and deepen what we might learn together from this episode:
1- What are the “three P’s” Boettke points to that are key to combating the Romanticism of socialism, and what is the significance of each?
2- How does Boettke apply Thomas Sowell’s famous Conflict of Visions to the socialist calculation debate? What do you think this implies about the possibility of settling the debate once again?
3- Boettke describes Hayek’s critique as deeper and more insightful than Mises’s. For what reasons does he say this, and to what extent do you agree? What does Boettke mean when he says that Hayek teaches us that the problem with socialism is a generative (rather than computational) one?
4- The conversation turns to the role of Ronald Coase in the story of the debate. Where do firms sit in relationship to the debate- or why do we need firms if we have markets?
5- Roberts and Boettke also discuss Michael Polanyi’s turn from science to philosophy, and Boettke stresses Polanyi’s work on the importance of science to a free society. Why is science so important to a free society? What is (or should be) the role of wonder, surprise, and admiration (cue Professor Smith) in both the physical and social sciences?
6- Toward the end of the episode, Roberts poses two questions to Boettke. I’d like to hear your answers to each of these questions:
a. Why won’t AI be able to solve the problem of economic calculation? Or will it???
b. Why has socialism come into vogue again? What is it about today’s culture and/or economy that has rendered socialism an attractive option again?
📖 Further Reading:
