I have 3 favorite papers on Mises:
- Jeff Tucker and Lew Rockwell, “The Cultural Thought of Ludwig von Mises.”
- Murray Rothbard, “The Laissez-Faire Radical: A Quest for the Historical Mises.”
- Joseph Salerno, “Ludwig von Mises as Social Rationalist.”
In particular, Salerno’s analysis of Mises is super-subtle and sophisticated.
Let me offer a slightly different take on it. Consider these two quotes of Mises Salerno uses:
Homo sapiens appeared on the stage of earthly events neither as a solitary food-seeker nor as a member of a gregarious flock, but as a being consciously cooperating with other beings of his own kind. …
We cannot even imagine a reasonable being living in perfect isolation and not cooperating at least with members of his family, clan, or tribe.
Where there are no money prices there… is no means for man to find out what kind of action would best serve his endeavors to remove his uneasiness as far as possible.
I think here “man” should be understood as species man, as a sufficiently large group of people “consciously cooperating within… family, clan, or tribe.”
But a man, such as solitary Crusoe, certainly can act in his own self-interest without prices. And that’s what I ask in an earlier post, whether Crusoe can run the world if somehow and under admittedly unreasonable assumptions put in charge of a huge economy.
I answer no, not because he can’t calculate, but because he can’t adjust production to novel data of whatever kind: changes in ends, technological means, environment, etc.
What’s after all the difference between socialism and capitalism? Under capitalism, each person seeks his own happiness. Under socialism, only one man, perhaps surprisingly also named Crusoe, acts; every other person simply robotically obeys his commands. There is no labor market, for example, or any other kind of market. The situation of socialism is no different from the situation of Crusoe alone on his island. Under socialism, other people are Crusoe’s mindless and obedient tools, like his axe and fishing rod under solitude. And, just like under solitude, Crusoe does not need to calculate in terms of money:
[Under socialism,] mankind is to be divided into two classes: the almighty dictator, on the one hand, and the underlings who are to be reduced to the status of mere pawns in his plans and cogs in his machinery, on the other.
If this were feasible, then of course the social engineer would not have to bother about understanding other people’s actions. He would be free to deal with them as technology deals with lumber and iron. (HA, 113)
Even under the free market, calculation is needed solely to deal with ordered introduction of novelties, what I call creative advance, change-amidst-permanence. For the market actors can simply be commanded by some great power to evenly rotate under threat of a terrible punishment. “From now on, unless still equilibrating, everyone shall do tomorrow and every day hence exactly what he did today (or else).” Money then becomes a mere token, a medium of exchange still but no longer a unit of account. Everything needful has already been calculated upon the forcible arrival of the equilibrium.
Now with other people, there are certainly additional complications, such that Crusoe must know their values scales and somehow maximize overall welfare rather than his own. But in order to get to the essence of the socialist quandary, we can assume that Crusoe “loves” all his billion slaves as his own children and “feels with them,” knowing every motion of their hearts, somewhat perhaps like a glorified saint. I know: Gulags, but stick with me. We can even assume with Mises that Crusoe “has made up his mind with regard to the valuation of ultimate ends. We do not question his decision.” (696)
So, let Crusoe be mysteriously put in the midst of a highly developed “evenly rotating” complex economy (meaning that he at this moment is unaware of a better allocation of resources) which he alone somehow labors in and manages. I suggest that the problem of adjusting production to new data is too hard computationally, even if Crusoe can juggle his utilities like a pro. And by “too hard” I mean impossible with all the computational resources the known universe might conceivably supply.
“New data” is a crucial proviso. If Crusoe were from the beginning of his adventure endowed with omniscience regarding (1) all possible technology, as well as (2) his own future valuations, and (3) future environmental changes, then even if he was practically immortal, he could make a perfect plan from now until kingdom come and grow his economy at the pace that maximizes his (or his “pawns'” and “cogs'”) long-term welfare.
Crusoe needs acting people, his fellow men, to come and rescue him, by taking ownership of his factories and becoming entrepreneurs, from the increasing complexity of his developing world.
P.S. In the paper, Salerno wonders about the meaning of “spontaneity” of action. “Spontaneous” action within the market is not purposeless action but generally unpredictable by other actors. Entrepreneurs try to predict future consumer preferences, but they cannot normally predict each other’s moves; or rather they make plans to ready production a year hence, say, without taking into account any innovations others might come up with during this period of production. The inner workings of competing firms are impenetrable to them. Smith’s introduction of novelty into the market is a genuine surprise to his competitor Jones. From Jones’ point of view, Smith’s actions were “spontaneous.”