The Socialist Economy Is “Impossible” (“Unmöglich”)—Not Just Inefficient Or Less Innovative Or Conducted without Benefit of Decentralized Knowledge; Socialism Is the Abolition of Rational Economy

In “Economic Calculation in a Socialist Commonwealth,” Ludwig von Mises demonstrates, once and forever, that, under socialist central planning, there are no means of economic calculation and that, therefore, socialist economy itself is “impossible” (“unmöglich”)—not just inefficient or less innovative or conducted without benefit of decentralized knowledge, but really and truly and literally impossible. . . . 

A society without monetary calculation, that is, a socialist society, is therefore quite literally a society without an economy. Thus, contrary to what has become the conventional interpretation by friend and foe alike, Mises was not indulging in rhetorical hyperbole but drily stating a demonstrable conclusion of economic science when he declared in this article:

Without economic calculation there can be no economy. Hence in a socialist state wherein the pursuit of economic calculation is impossible, there can be—in our sense of the term—no economy whatsoever. . . . Socialism is the abolition of rational economy.

--Joseph T. Salerno, postscript to Economic Calculation in the Socialist Commonwealth, by Ludwig von Mises (1990; repr., Auburn, AL: Mises Institute, 2012), 49, 53-54.

The Real Character of the Centrally Planned Economy

Socialism attempted to replace billions of individual decisions made by sovereign consumers in the market with “rational economic planning” by a few vested with the power to determine the who, what, how, and when of production and consumption.

The real character of the so-called centrally planned economy is well illustrated by a quip I heard several years ago by Soviet economist Nikolai Fedorenko. He said that a fully balanced, checked, and detailed economic plan for the next year would be ready, with the help of computers, in 30,000 years. There are millions of product variants; there are hundreds of thousands of enterprises; it is necessary to make billions of decisions on inputs and outputs; the plans must relate to labor force, material supplies, wages, costs, prices, “planned profits,” investments, transportation, storage, and distribution. These decisions originate from different parts of the planning hierarchy. They are, as a rule, inconsistent and contradictory to each other because they reflect the conflicting interests of different strata of bureaucracy. Because the next year’s plan must be ready by next year, and not in 29,999 years, it is inevitably neither balanced nor rational. And Mises proved that without private property in the means of production, even with 30,000 years of computer time, they still couldn’t make socialism work.

--Yuri N. Maltsev, foreword to Economic Calculation in the Socialist Commonwealth, by Ludwig von Mises (1990; repr., Auburn, AL: Ludwig von Mises Institute, 2012), viii-ix.