Decentralized Economic Coordination: Let a Hundred Flowers Bloom Reply

By Kevin Carson, Center for a Stateless Society

The calculation problem, as stated by Ludwig von Mises and Friedrich Hayek, has been central to most libertarian arguments against non-market or non-price forms of economic coordination.

The Misesian variant, argued in Economic Calculation in the Socialist Commonwealth and Socialism, is based on the role of factor input pricing in allocating inputs among competing uses. We choose between factors of production, so the argument goes, and decide which ones to economize on, by comparing their prices. We decide which uses to put them to by comparing the economic value produced to the cost of the input.

Hayek’s version of the calculation argument is based on complexity: i.e., the sheer volume of information to be processed. Market prices allocate thousands of different resources among thousands of different kinds of production, in ways that a central planning bureaucracy could not cope with.

I will state up-front that I am an agnostic on the question of whether non-market forms of coordination could be as or more effective than market pricing. I am also an agnostic on the question of whether economic coordination or rational decision-making could exist at all without market pricing, although I am somewhat inclined to say yes. So if you’re looking for a definitive statement on the comparative efficiency of market and non-market coordination, or an endorsement of some specific coordination mechanism, you’ve come to the wrong place.

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