POLITICAL: So how do we apply the calculation problem today


The Police State Is Doomed
by Gary North

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In 1920, Ludwig von Mises wrote a short essay, “Economic Calculation in the Socialist Commonwealth.”

He argued that socialist economic planning is inherently blind. Without free market prices that are based on private ownership, the government’s central planners have no way of knowing where to allocate scarce resources. This is especially true of capital goods. The planners are forced to copy prices in the non-socialist societies. This was his theory. It turned out to be correct in practice.

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Today, in the Gooferment, they don’t know how to use capital or expense dollars? It’s obvious every time you look at their pronouncements. Real people make decisions about trade offs all the time: If I do X, it precludes Y. Does the Gooferment even have the concept of capital and expense? Look at New Jersey’s version of the Big Dig, the new trans-Hudson tunnel. The Guv is expecting a cost overrun. And, how does that get paid for? But the bigger question is: does it make economic sense? A private entrepreneur investing his own capital would say: does the roi exceed the cost of capital? The Gooferment can’t even phrase the question. They don’t know the answer and because it’s the taxpayer’s money. Or the posterity of the taxpayer who will pay. The politicians and bureaucrats just don’t care.

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