Economic Calculation Problem

The economic calculation problem is a criticism of socialist economics. It was first proposed by [Ludwig von Mises]? in 1920. Those who agree with this criticism claim it is a refutation of socialism, and that it shows why a socialist command economy could never work.

The Argument goes as follows:

1. Without private property in the means of production, there will be no market for the means of production;
2. Without a market for a means of production, there will be no monetary prices established for the means of production;
3. Without monetary prices reflecting the relative scarcity of capital goods, economic decision makers will be unable to rationally calculate the alternative use of capital goods.

This argument served as a starting point for F. A. Hayek's work on the use of knowledge in society.