People Produce for Profit But To Imply That Production for Profit Does Not Mean Production to Satisfy Needs, Is Entirely False

We refer to the objection that in capitalist societies prices are used as indicators of profitability. People produce for profit, it is said. This statement is correct. If the commodity to be produced, or resold, is not demanded at a price that covers costs, it will not be produced or bought at that price. On the other hand, to imply that production for profit does not mean production to satisfy needs, is entirely false. The contrary is the case. The producers' and traders' every effort is directed towards anticipating and satisfying the needs of the buyers, in the last resort the needs of the public, such as they are expressed in effective demand. The success of producers and traders will depend on their ability to do this. Their ability to anticipate correctly will decide whether the result will be profit or loss, which in the long run will decide whether they can stay in business or not.

Professor Boris Brutzkus goes so far as to say that the producer and trader in a capitalist country, strictly speaking, does not need to keep books or to calculate, as prices will give him all necessary indications. If he does not take heed of prices, he risks losing his fortune and his position. In socialist countries where the state is the only owner of the means of production and the only distributing agency, this automatic purging process does not exist, so that, as Brutzkus says, “economic calculation is of far greater significance in the socialist, than in the capitalist society.” (Economic Planning in Soviet Russia, p. 11.)

—Trygve J. B. Hoff, appendix A of Economic Calculation in the Socialist Society, trans. M. A. Michael (London: William Hodge and Company, 1949), 198, 198n.

Many Economists Maintain That Distribution Is the Chief Problem in any Socialist Society; It Is Obviously So in One with a Moneyless Economy

In examining the need and possibility of economic calculation in the different forms of socialist communities, it is natural to start with a study of a socialist society which uses no money, i.e., one with a natural economy as it is sometimes called. The moneyless society is the great ideal of many socialists, and even as late as in February, 1932, the Finance Commissar of the Soviet Union said that the policy of his Finance Department aimed at preparing the day when money "could be relegated to the museums."

The criterion for a society with a moneyless economy is that its goods are distributed in natura without the use of money or of other means of payment which could serve as units for accounting. It is obvious that there must be certain difficulties in undertaking calculation in a society where neither prices nor other forms of common denominators exist. Could it be shown that economic calculation is not possible in a society with a moneyless economy owing to the difficulties it creates for calculation in the purely productive stages, this would be the end of the investigation so far as this form of society was concerned.

Nevertheless, the distribution side of the question has also to be examined, partly because the distribution of goods which have no common denominator will create the need for a different form of control, and partly because the distribution of communal goods raises special and interesting problems in a society with a moneyless economy.

In this connection it should be remembered that in an economy of private enterprise production and distribution take place uno acto, so that distribution automatically results from the individual's contribution to the process of production, whether it takes the form of mental or physical labour, of special capability or knowledge, or of putting land or other forms of capital at the disposal of production.

In socialist communities production and distribution will be two separate operations, nor will there necessarily be any connection between contribution and remuneration, for the central authority will decide the distribution of income. Many economists maintain that distribution is the chief problem in any socialist society; at any rate it is obviously so in one with a moneyless economy.

--Trygve J. B. Hoff, Economic Calculation in the Socialist Society, trans. M. A. Michael (London: William Hodge and Company, 1949), 32-33.