July 19, 2012

Zeitgeist vs. Austrians - The Moral Calculation Problem

Last month I touched upon a phenomenon. Strange attractors. Energies diametrically opposed and in search of each other seemingly for a discharge. I'm talking about those people that support the Zeitgeist Movement and a Resource Based Economy and those people that come running over to say we are deeply mistaken (to put it diplomatically), namely "Austrian Economists." The country itself is not so much important, the school of thought is.

Ludwig von Mises, one of the earliest advocates of this economic school and is more or less the spiritual father. In discussions about economics people refer to him and his work. Just like Marx, von Mises' teachings go way back. He was born to a wealthy Jewish family and he earned his doctorate in 1906 at the University of Vienna. Hence Austrian economics. (For a more detailed article see here.)

My blog is not so much about the man, it's about what comes about in discussions. Having a progressive view on economics with a RBE model, Austrians economists immediately counter with "the economic calculation problem" which was forwarded by Ludwig von Mises. What he was saying is that socialistic market economics are doomed to failure because goods can not be properly allocated without a price mechanism. The latter is, according to him, the most efficient way of handling economics.

So that is a point of critique, one of many, coming from the "Austrians" used to curtail any progressive economic viewpoints. While the price mechanism is a way of distributing and allocating goods, it is by far not efficient in the broader scope. It is the most convenient way, not the most efficient. If you have a scarce good there's absolutely no guarantee it will wind up where it is most needed. Scarcity in a supply and demand system means that the price will go up. A scarce good wont go where it is most needed, it goes to the highest bidder.

Hypothetically speaking, if you have a rare medicine. It wont go to brilliant young minds who happen to be sick, it will go to rich old men. The millionaires and billionaires. Those are the people that benefit the most from the price mechanism. In essence the price mechanism is immoral and a reinforcement to capitalism itself. Just look at the world, see how many people are deprived, and you can ask yourself just how well the price mechanism is working.

What we advocates of a Resource Based Economy are saying is that with our current state of technology and computerized systems demand can be calculated and production adjusted accordingly using high levels of automation. These processes are ongoing. Currently companies can track produce all along their assembly line. Postal services know where parcels are throughout the world. Warehouses know where goods are stored. Such computer systems can be, with ease mind you, used to create an abundance of goods for the people.

Can you get your hands on everything you want in a RBE? No, part of the equation is that you ask yourself what is reasonable. It's a strange question in a world where everything is seemingly for sale, I know. On the other hand, this is the key where everyone can have a normal existence (housing, food, water, energy) and can have access to all the necessities of life. The price mechanism never accomplished that. In fact today 1.7 billion people live in absolutely poverty. Clearly a failure of the price mechanism. It doesn't provide for everyone, it never did. That's an axiom you wont find in Austrian Economics.

No comments: