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Okay Drummnutt, you wanna learn something today?



February 02, 2009 – Comments (12)

"A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism: is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings." - Ludwig Von Mises, Human Action

I propose a challenge to you Drummnutt. I don't particularly want to pick on you, but since you have been quite active lately I am guessing you have the time to do some research. It's also a good chance to educate my friends about economics and liberty, and how inseparable they are.

Drummnutt, I present you the Economic Calculation Problem of the Socialist Commonwealth. Written in 1920, Ludwig Von Mises' explosive essay shocked academic institutions around the globe, especially in America and Europe where Socialist educators had fortified their power. 

"Before Ludwig von Mises raised the calculation problem in his cele-
brated article in 1920,'everyone, socialists and non-socialists alike, had
long realized that socialism suffered from an incentive problem. If, for
example, everyone under socialism were to receive an equal income, or,
in another variant, everyone was supposed to produce "according to his
ability" but receive "according to his needs," then, to sum it up in the
famous question: Who, under socialism, will take out the garbage?

But this was different. Mises, the former Chief Economic Officer of the Austrian Government, felt certain that he had proven Socialism to be impossible. Since all transfers of goods in a Socialist society would be internal transfers, economic calculation becomes impossible, The Socialist economic planning board would have all the resources at its disposal and no idea how to allocate them.

The Calculation debates continued throughout the 1930s and 1940s. On one side was Mises, forced to flee Europe for criticizing the Nazi Socialist Party's economic policy (a policy that America's government has wholeheartedly embraced.) On the other side was the entire army of American Socialist educators, born and raised under the umbrella of collectivism and intellectual dishonesty. 

There were quite a lot of theories thrown back and forth so I will just link to them, let you absorb them,  and study their critiques:


"But now, happily, the day
has been saved for socialism, since Taylor-Lange-Lerner have shown
that, by jettisoning utopian ideas of a money-less or price-less social-
ism, or of pricing according to a labor theory of value, the socialist
Planning Board can solve these pesky equations simply by the good
old capitalist method of trial and error.

Joseph Schumpeter

Joseph Schumpeter and Frank H. Knight are interesting examples of
two eminent economists who were personally anti-socialist but were
seduced by their Walrasian devotion to general equilibrium and their
lack of a genuine capital theory into strongly endorsing the orthodox
view that there is no economic calculation problem under socialism. In
particular, in capital theory, both Schumpeter and Knight were disciples
of J. B. Clark, who denied any role at all for time in the process of
production. For Schumpeter, production takes no time because produc-
tion and consumption are somehow always "synchronized."

But here I'm going to do you a favor and link my favorite criticism of Mises. It's from a LIbertarian of all people:

Why I'm Not an Austrian Economist by Bryan Caplan

In Caplan's view, Mises merely proved that Socialism kinda sucks real bad, but it's not impossible!

So here's my challenge to you Drummnutt. Take the time to read everything I've laid out here. Study the Economic Calculation Problem and then present an argument using reason and analysis. Tell us and why a regulated, planned economy would work. Refute Mises, search for rebuttals of your position, and then refute those.  Prove your points. 

If you can do that, you will be more than just a pesky blogger. And by doing so, you will help us all learn something new whether our personal leanings are for Socialism, Capitalism, or some other economic ideal.

I have to be off to work now, so I may only have a chance to check in on you from time to time. Good luck!

David in Qatar 




12 Comments – Post Your Own

#1) On February 02, 2009 at 9:48 AM, drummnutt (< 20) wrote:

Unfortunately you are talking about a different system to the one I am talking about. I know this is a bit difficult to understand. "Pure" socialism (basically communism) is what you are talking about here, not "democratic" socialism.

In the same way "Pure" capitalism does not work. USA is not a pure capitalist society, it is moderated by "democratic" socialism. You pay taxes, so that someone who's kidneys don't work, doesn't have to find $60,000 per year for dialysis to stay alive. You pay taxes so that you can pay an army to protect your state (or invade another, but I'd better leave this bit out).

End of lesson, thanks for your attendance!

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#2) On February 02, 2009 at 10:06 AM, whereaminow (< 20) wrote:

I never want to be accused of defeating a straw man, so...

Will you then, enlighten the class, as to the definition of democratic socialism

Democracy is a political institution. The U.S.of Old was a representative republic with limited democracy. Please indicate which of the Founding Fathers cherished democracy. For your review, here are the Federalist Papers.

Socialism is an economic system in which the collective owns the means of production.

Finally, please explain to me how you arrived at the conclusion that pure capitalism does not work.

David in Qatar

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#3) On February 02, 2009 at 10:48 AM, whereaminow (< 20) wrote:

You know what's funny? I just found where you copied your rhetoric from.

Let's walk through this know and see exactly why Prime Minister Rudd is wrong:

Mr Rudd writes in The Monthly that just as Franklin Roosevelt rebuilt US capitalism after the Great Depression, modern-day "social democrats" such as himself and the US President, Barack Obama, must do the same again.

As we have shown before, FDR did not rescue America from the Great Depression. There are several reasons for this. Just like Rudd, FDR (and Hoover before him) had no idea what caused the Great Depression. The inflationary/deflationary practices of central banking cause boom and bust cycles. We have discussed this at length in other posts.

He mocks neo-liberals "who now find themselves tied in ideological knots in being forced to rely on the state they fundamentally despise to save financial markets from collapse".

LOL he sounds just like you! Wonder why that is... As for neo-liberals, that would be Socialists. Classical Liberals stand opposed to all forms of government intervention. We do not want the government to save us. We want the government to get out of the way. As for Rudd, he has successfully defeated a straw man. Bravo.

Rudd also makes the nonsensical argument that America had too much free market capitalism. Since when is The Federal Reserve a Capitalist institution? From its inception, TFR has promoted Socialist economic policies. Mr. Rudd is either ignorant intellectually dishonest.

It is clear that Rudd is an angry and bitter man. But that point is irrelevant and I don't wish to focus on ad hominem attacks.

But his calls for "change" and A New World Order are nothing new. His philosophy is a mix of Marxism and One World Government and an attack on liberty and private property. His mission is to involve government in every aspect of the lives of his citizens.

If that is what Australians want (I doubt that, but they're going to get it anyway), so be it. But I wouldn't wish such a fate on my worst enemy.

David in Qatar

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#4) On February 02, 2009 at 10:52 AM, kdakota630 (28.81) wrote:

David in Qatar

The only reason I haven't added you as a favourite player is because you have no stock picks.

So, I ask the question...

Why no stock picks?

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#5) On February 02, 2009 at 11:00 AM, drummnutt (< 20) wrote:

Thank you for the respect. I will of course return the favour.

The three pilars of modernist political thought (1880's - 1980's) are: Capitalism, Communism and Fascism. The second 2 have (I am sure you will agree) been proven inefficient, overbearing and often brutal toward people. The only one of these ideologies to survive, in some reasonable form, into the post-modern era (1980's - ?) is capitalism. There has never been a true, pure capitalist society. Even America uses some of its earning capacity to provide for its less fortunate citizens. The capitalist systems, which have been moderated by social activities by governments (therefor socialist in nature), were the strongest until late 2007.

The problem is however, is that the pendulum swung too far from the moderation of democratic socialism, to a more neo-liberal movement during the Regan/Thatcher era, that was founded on greed disguised as economic policy. Joe and Jill in the street have been fed rhetoric from modernist capitalist ideas. Joe and Jill like the sound of lower taxes. Joe and Jill like the opportunity to buy a house, TV, and car that they cannot afford. Joe and Jill like the sound of less government "interventionm". With this pendulum swung too far, we are now at the dawn of a necessary change in ideas.

This will get long winded from here. I don't want to clog up your blog, but I will elaborate further from here in the weeks to come. For a start, read my blog on balance, and please, click through to the article within the blog.


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#6) On February 02, 2009 at 11:07 AM, drummnutt (< 20) wrote:

The errors are too many to even begin to pick apart in comment #3.

Would you like rum with that rhetoric, or does it just slide down the back of your throat real smooth these days?? OPEN UP YOUR MIND.

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#7) On February 02, 2009 at 11:22 AM, whereaminow (< 20) wrote:

You got it Prime Minister Drummnutt!

What is worse? The man who blindly copies the rhetoric of his leader.. or the leader who uses intellectual dishonesty to steal from his own people?


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#8) On February 02, 2009 at 12:14 PM, whereaminow (< 20) wrote:


I don't have an honest answer for you. I've been coming to this site for about 5 years now. I used to just read the staff articles and that was it.

Then the bailout happened. A couple of TMF staff writers were strongly in favor of the bailout and I found myself debating its merits on those comment boards.

That brought me here.

Now that I am here, my only hope is share what I know about Austrian economics and Libertarianism. I didn't expect to have any positive responses. After all, "big L" Libertarians like myself make up less than 1% of the population if you go by voting records. We are the lunatic fringe, as I have been called on so many occasions.

And yet, right there, you can see a problem with the mainstream line. If our policies (free market idealism and limited government) have not been popular for 100 years, how can these policies be responsible for our current economic problems?

I have not started picking stocks yet, but I will tell you what I invest in: Defense Contractors. I love Northrop Grumman (as a stock to own).

What would I "red thumb"? Any company without political influence. Such is the future of business in America. I hope I am wrong.

If I were to "green thumb" anything other than the Military-Industrial Complex or the Medical-Industrial Complex, what would it be.....

I suppose any industry where entrepreneurs can still exert a great deal of influence. The more high-tech the better, since politicians can't tell you the difference between the Internet and an intranet. If they don't understand it, they usually leave it alone (until it starts to threaten their power... stand by for that).

David in Qatar


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#9) On February 02, 2009 at 3:53 PM, DaretothREdux (46.59) wrote:


I always thinks it funny when people tell me to open my mind. Having strong beliefs which took years of debate and research seem to mean that I never think about opposing opinions. 

A mind should only remain "open" until it finds the truth. After that, what is there? Nothing but more truth. To deviate should only be temporary and used as a tool to sharpen your current beliefs.

It's not like I never changed my mind, on the contrary I have simply reached a place where change is less necessary.

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#10) On February 02, 2009 at 5:23 PM, whereaminow (< 20) wrote:


So true. Having an open mind is the only way to fill it! If I had a closed mind, as drummnutt implied, how could I possibly present so many arguments for and against my own position?!

On the other hand, if I were to simply repeat the same argument (almost verbatim) of Prime Minister Rudd over and over again......

David in Qatar

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#11) On February 02, 2009 at 11:04 PM, devoish (65.41) wrote:


A mind should only remain "open" until it finds the truth. After that, what is there?

The possibility of error.

(An answer just as a response to the one question, it is not intended to suggest I have proven you wrong in any other discussion. That as always is for you to decide.)


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#12) On February 02, 2009 at 11:44 PM, DaretothREdux (46.59) wrote:


I did not say that a person could ever know anything with 100% certainty, but after much study and debate and rehashing of ideas one can be nearly 100% certain. There is always a possiblity of error in any belief or endeavor, but ideas founded on Truth seem to prevail.

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