Socialist Calculation Debate - Essay Example

number Socialist Calculation Debate The socialist calculation debate is defined as a continuing dialogue on the way in which a socialist economy would operate under the economic calculation concept in the absence of money, law of value as well as the financial prices that are allocated to capital goods and means of production. This debate mostly laid emphasis on the application of economic planning mechanism to allow means of production to serve as a substitute in the case of capital markets, and whether such kind of arrangement would be inferior or superior to capitalism in terms of productivity and efficiency. With respect to the role of Hayek in the socialist calculation debate, he reveals his position with respect to the possibilities of planning. While arguing against the possibility that is associated with planning in the case of the socialist calculation debate, Friedrich Hayek worked on two major theoretical papers. These include; “The Meaning of Competition” and “The use of Knowledge is Society”. Both of Hayek’s works were aimed at serving as a disproof to a fellow economist named Oscar Lange as well as the endorsements that he had made regarding a planned economy. This paper will evaluate Hayek’s works; “Meaning of Rivalry” and “The Adoption of Knowledge in Society”, to help determine his position with respect to the possibilities of planning for the economy. Discussion Meaning of Competition Based on his work, “Meaning of Competition”, Hayek reveals the benefits that are associated with a free market, which has not been subjected to the regulations that the government imposes to regulate the market. Instead, he reveals that the suppression of competition is among the major evils that prevail in a society, which experience has revealed to be a regular consequence. Also, these evils are also different from those imperfections that are affiliated with rivalry. Hayek stipulates that competition is an essential process that facilitates in the formation of different points of view. This is because it is efficient in terms of facilitating for the spread of information to diverse parties. It also facilitates in the creation of coherence and unity in the economic system, which most people presuppose whenever they treat it as one market. With a coherent and united economic system, it becomes possible for people to identify the goals that they have in common, and hence adopt approaches that can help them to boost the productivity and competitiveness of their society (Vaughn 537). Competition helps people to understand the best product for them and where they can obtain it at a cheaper price. It is for this case that most people tend to have sufficient information about opportunities and possibilities regarding particular products and services, and this poses difficulties with respect to their participation in the market efficiently. Therefore, competition is a process that lays emphasis on continuous change based on the needs of the market and the players in it. This makes it possible for market data to change in a continuous manner. It is for this reason that one easily misses particular information regarding the market if he adopts a theory that treats data in a competitive market as constant. This is because a competitive market is characterized by a huge inflow of players on a daily basis, and thus an indication that data in the market is in continuous change (Vaughn 538). With the incorporation of “The Meaning of Competition”, in the market by Hayek, it is true that this initiative plays a crucial role in terms of facilitating for proper planning of the market. This is because the market players manage to avoid those regulations that limit their competitive efforts as in the case of a market that is dominated by government conventions. In this case, the players are able to gather sufficient information regarding the state of the market, and devise ways in which they can cope with the competitive pressures effectively. Since competition encourages people to raise different points of view regarding the state of the marketplace, market players are able to unite their efforts and devise strategies that allow them to treat their society as one market. This way, they are able to gain an understanding of the needs of the market and how to improve it further. Also, the market participants can be able to devise plans that can make their market to be highly competitive. This is because they have sufficient information on where to obtain the best product and at the most affordable price. As a result, it becomes possible to plan for the economy and enhance its productivity and competitiveness significantly (Vaughn 540). The Use of Knowledge in Society With respect to the use of knowledge in an economy, Hayek offers a distinction between two forms of knowledge. The scientific kind of knowledge is the one that Hayek adopts first, since it is the one that is awarded overwhelming significance in the contemporary times. The knowledge of the general rules comes in second, and it implies being in possession of information based on issues of place and time. Hayek believes that this kind of knowledge can play a crucial role in terms of allowing any society to succeed. By taking time to be sure that one is located a the right place at the right time, one can be able to realize significant success in any particular initiative. The people who have this kind of knowledge realize successes in life, and witness significant benefit from it (Vaughn 542). In this perspective, it is evident that knowledge plays a crucial role with respect to facilitating for effective planning. It is not possible for a person to plan for something that he does not have sufficient knowledge about since this initiative could lead to negative repercussions. With the right knowledge, one is capable of formulating decisions that can impact on the performance of an organization or market positively. However, it is crucial for one to understand that it takes time to acquire knowledge that is relevant to a particular situation. For instance, one should make significant investments through education to acquire the scientific kind of knowledge. This is because it is vital in terms of allowing people to fit appropriately in the contemporary business environment (Vaughn 544). Additionally, the acquisition of knowledge of general rules is essential. However, this depends on the background of a person towards a particular issue. This means that experience in a particular field is essential in terms of allowing a person to make effective decision in an organization or the market. Therefore, it is true that “The Use of Knowledge in Society” is essential in terms of allowing one to develop proper planning techniques that can allow the market to be efficient based on the activities that take place there (Vaughn 544). Hayek’s Australian Economics Perspective versus Neoclassical Economics Australian economists are regarded as being the major contributors to the theory and policy of economics. They were among the principal developers of theories of opportunity cost, marginal utility, value and price, markets and competition, capital and interest, comparative economic systems and business cycles. Australians are popular for laying emphasis on imperfect knowledge, universal role of time in decision making, and market coordination nature by facilitating for continual adaptation to fluctuating situations. This is unlike the case of neoclassical economics who treat man as a mathematical function. In this case, man is regarded as being in possession of particular tastes and preferences that are induced by his surroundings and the way in which he responds in predictable ways when confronted with various objective that contain tradeoffs, especially in the case of market prices (Vaughn 547). Conversely, in the case of Australians, man is treated as a purposeful being who is capable of thinking, planning and acting. The emphasis that they lay on is incomplete knowledge, and it is based on Australian economics. Most Austrians find the price taking assumptions that the neoclassical competitive models adopt as less useful, and they also reject equilibrium concepts entirely. Based on economic calculation under socialism debate, questions have raised regarding the possibility of an economy to operate efficiently in the absence of free markets, and in case individual ownership of capital and land do not prevail in the market. A number of economists support this theory and have constructed a model that targets a centrally planned economy. This model also incorporates neoclassical tools to see if they could work in a socialist society (Vaughn 548). In this case, the introduction of “just” distribution of wealth and equilibrium in a model that is competitive played a crucial role with respect to maximizing the welfare of humans. Also, this initiative made it possible to introduce social programs that were capable of reproducing perfect competition in an economy that is directed centrally. This model was treated as being superior to capitalism as well as the tribulations that are affiliated with a free market economy. This is especially the case with externalities, monopolies, unjust distribution of income and wealth, and business cycles. This is because it was possible to avoid them under socialism market. These concepts implied that just as economic thought can be applied to capitalism, the same case can happen socialism. Since the socialism model requires a number of prices, demand and supply equations, then it is possible to formulate a socialist equation (Vaughn 550). In the case of Hayek, it is true that he lays emphasis mostly on the Australian economic model as opposed to the neoclassical model. This is because his articles target competition and use knowledge to plan for a market effectively. In a competitive environment that is not governed by regulations, the market players find it possible to gather sufficient information regarding the state of the market and plan for it in an effective manner. Hayek also encourages people to seek knowledge both from scientific means as well as from general rules. Therefore, since Australian economists treat the market as being characterized by imperfect information, competition and knowledge allow them to gain sufficient evidence on the state of the market, and hence adopt strategies that encourage them to devise efficient operational strategies while in the market. Conclusion The paper has revealed that the Australian and neoclassical economic models are different in terms of the way that they are fostered into the market. The Australian model is based on imperfect information, universal role of time and the need for market coordination. Conversely, the neoclassical model treats man as a mathematical function, and one that is in possession of particular tastes and preferences that are induced by his surroundings in a manner that is predictable. In this case, it is true that the Australian model is more effective while compared to the neoclassical theory since it allows one to see for evidence regarding the market state, and hence allow him to devise effective market survival strategies and plans. Works Cited Vaughn, Karen. "Economic Inquiry." Economic Calculation Under Socialism 18.4 (2007): 535-554. Print. Read More