Chapter 44 Chapter 7 The Calculation of Socialism (1): The Nature and History of the Problem-2

two It is not always clear whether this widespread belief is based on the clear judgment that socialist society has no economic problems, or whether it simply shows that the people who hold it do not know what economic problems are.Perhaps it is usually the latter, which is not surprising at all.The great economic problems that economists understand, and which they think will also have to be solved in a collectivist society, are not those that are currently being carefully solved by anyone in the sense of solving the problems of the family.In a perfectly competitive society, no one is concerned with anyone else's economic problems but only with his own.Therefore, there is no reason whatsoever to think that the existence of an economic problem should be known to anyone else, in the sense that economists use the term "economic problem."But the distribution of limited resources among different users—an economic problem—is more of a social problem than it is for individuals.And, although decisions are not made consciously by anyone, competition does lead to some solutions.

Undoubtedly, if the above question were posed in general terms like this, everyone would admit its existence.But few realize that it is fundamentally different from engineering problems not only in difficulty but also in character.The growing fascination of modern society with problems of engineering character has blinded people to economic problems with quite different characteristics, and perhaps this is the main reason why the nature of economic problems is less and less understood.At the same time, the confusion is greatly enhanced by the everyday terms used to discuss these two types of issues. The familiar term "maximizing results given given conditions" captures the meaning of both types of problems.For example, the metallurgist trying to extract the maximum amount of gold from a given amount of gold mines, the military engineer trying to build a bridge in the shortest possible time with known manpower, and the astronomer trying to invent a Manufacturers of optical instruments who see farther planets, etc., are all concerned with technical issues.In each of the above cases the common character of the problems is determined by the singularity of the end, the absolute determinate character of the end (to which the possible means are devoted).If the possible means of attaining a given end refers to a fixed outlay to be spent on factors of production at given prices, this does not alter the essential character of the matter: According to this view, production is determined according to given prices The industrial engineer who finds the best method for a commodity is concerned only with technical problems; though he may speak of his attempt to discover the most economical method.But the only thing that makes his decision actually an economic decision is not any part of his calculation, but the fact that he bases his calculation on the price when he finds it in the market.

The director of all the economic activities of a society has to face the problem only when the order of importance of the different needs of the society is determined in a definite or absolute way, so that provision is always made for some need regardless of cost. , which is similar to the problem that engineers want to solve.If it were possible for him first to decide on the best way to produce a necessary supply, say food, as the most important need, as if it were the only need, and then only when certain resources were fully satisfied When there is still a surplus after the demand for food, then consider other production, such as the production of clothing, then there will be no economic problems.For in such a case nothing remains but resources that cannot be used for the first purpose.This is either because it cannot be converted into food, or because there is no further need for food.The standard is simple: whether a huge amount of food has been produced, or whether a greater yield may be obtained by a different method.If the further requirement is to leave as many resources as possible for other purposes, the problem will no longer be characterized as purely technical, but will take on an entirely different character.If one engineer proposes a method that leaves a lot of land but little labor for other purposes, while at the same time another engineer leaves a lot of labor and little land, then in the absence of evaluation criteria In the case of , how to determine which of the quantities is greater?If there were only one factor of production, the above question could be decided unambiguously in terms of technology alone, so that the main problem on every production line would again be that of maximizing output from any given quantity of the same resource.The remaining economic question of how much to produce on each line would in this case be a very simple and almost negligible one.However, this possibility ceases to exist once there are two or more factors of production.

So, as soon as we compete for available resources for different purposes, economic problems arise.The sign it produces is that cost issues must be considered.Costs here, like costs anywhere else, simply refer to the benefits of using a given resource elsewhere.It makes no difference whether this is merely the time of possible work lost for recreation, or the use of material resources on an alternative production line, it is clear that in any possible economic system a choice has to be made. In this type of decision, people must choose among different uses of a given resource in any economic system.However, the choice of two possible solutions cannot be taken in an absolute manner as in the previous example.Even if the directors of the economic system seem to be well aware that one person's food is always more important than another's clothes, it by no means necessarily means that one person's food is more important than two or ten people's clothes.How crucial this question is becomes clearer if we look at the secondary basic needs.It may well be the case that, although society would have a greater demand for one additional doctor than for one additional schoolteacher, three additional teachers might appear preferable to one additional physician when training costs three times as much for physicians as for teachers .

It has already been said that in the present order of things such economic problems are not resolved by conscious decision by anyone, a fact which renders most people unaware of the existence of such economic problems.In this sense, decisions about whether to produce a good and how much to produce are economic decisions.But making such a decision by an individual person is only a partial solution to the economic problem concerned.Individuals who make such a decision base their decisions on a given price.The fact that these prices are influenced to some degree (perhaps a small degree) by this decision does not affect the person's choice.Another part of the problem is solved through the role of the price system.But it was resolved in a way that could only be revealed by systematically studying the system's runtime.It has been pointed out that the system does not require anyone to understand it in order to function.But if people really don't understand it, they probably won't make it work.

The truth in this respect is well reflected in the popular appraisal of the relative merits of economists and engineers.It is probably not an exaggeration for most people to say that engineers are the ones who actually do things, while economists are obnoxious people who lean back in their chairs and explain why the best efforts of those who came before them have been thwarted.In a sense, this is not untrue.But the implication that what economists study and what engineers may ignore is unimportant and should be ignored is absurd.An engineer's own ambition to solve a problem is limited by some spontaneous force which might otherwise be perfectly solved, and to understand this spontaneous force requires the specialized training of an economist.