Economic calculation and socialism

One of the distinctive achievements of the Austrian School is the calculation argument against the feasibility of a rational allocation of goods in an advanced socialist economy. This argument, consciously abstracting from political aspects, was the one whose weight was recognized by both proponents and opponents of socialism, but for years it was often neglected or misunderstood. In this chapter, we recall the final Misesian formulation of the argument, as presented in Human action, which best emphasizes both the monetary and the speculative-entrepreneurial character of the economic calculation. We also revisit discussions that arose for years over the argument itself: the differences between its formulations by Mises and Hayek; the scope and relevance of this argument for the explanation of real-world failures; and its often neglected underlying assumption of private property.