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Calculation in kind or calculation in-natura is a way of valuating resources and a system of accounting that uses disaggregated physical magnitudes as opposed to a common unit of calculation. As the basis for a socialist economy, it was proposed to replace money and financial calculation. [1] In an in-kind economy products are produced for their use values (their utility) and accounted in physical terms. By contrast, in money-based economies, commodities are produced for their exchange value and accounted in monetary terms.
Calculation in kind would quantify the utility of an object directly without recourse to a general unit of calculation. This differs from other proposed methods of socialist calculation, such as Taylor-Lange accounting prices, and the use of labor time as a measure of cost. [1]
Calculation in kind was strongly advocated by the positivist philosopher and political economist Otto Neurath when employed by the Bavarian Soviet Republic. This led to a discussion in the early 1920s, in which much of the discussion about socialism centered on whether economic planning should be based on physical quantities or monetary accounting. Neurath was the most forceful advocate of physical planning (economic planning using calculation-in-kind) in contrast to market socialist neoclassical economists who advocated use of notional prices computed by solving simultaneous equations. [2] Austrian school critics of socialism, particularly Ludwig von Mises, based his critique of socialism on the calculation problem. [3]
The most prolific modern proponent of calculation in kind is the Scottish computer scientist Paul Cockshott who differs from Neurath in that he advocates the use of labour vouchers to set a scalar restraint on consumption.
Proponents of in-kind calculation argue that the use of a common medium like money distorts information about the utility of an object. Socialists in favor of calculation in kind argued that, in a system of in-kind calculation, waste associated with the monetary system would be eliminated, and in particular objects would no longer be desired for functionally useless purposes like resale and speculation – they would only be desired for their use-value. [4]
The economic calculation problem (ECP) is a criticism of using central economic planning as a substitute for market-based allocation of the factors of production. It was first proposed by Ludwig von Mises in his 1920 article "Economic Calculation in the Socialist Commonwealth" and later expanded upon by Friedrich Hayek.
The labor theory of value (LTV) is a theory of value that argues that the exchange value of a good or service is determined by the total amount of "socially necessary labor" required to produce it. The contrasting system is typically known as the subjective theory of value.
Human Action: A Treatise on Economics is a work by the Austrian economist and philosopher Ludwig von Mises. Widely considered Mises' magnum opus, it presents the case for laissez-faire capitalism based on praxeology, his method to understand the structure of human decision-making. Mises rejected positivism within economics, and defended an a priori foundation for praxeology, as well as methodological individualism and laws of self-evident certainty. Mises argues that the free-market economy not only outdistances any government-planned system, but ultimately serves as the foundation of civilization itself.
An economic system, or economic order, is a system of production, resource allocation and distribution of goods and services within a society. It includes the combination of the various institutions, agencies, entities, decision-making processes, and patterns of consumption that comprise the economic structure of a given community.
In economics, a price system is a system through which the valuations of any forms of property are determined. All societies use price systems in the allocation and exchange of resources as a consequence of scarcity. Even in a barter system with no money, price systems are still utilized in the determination of exchange ratios between the properties being exchanged.
Criticism of socialism is any critique of socialist economics and socialist models of organization and their feasibility, as well as the political and social implications of adopting such a system. Some critiques are not necessarily directed toward socialism as a system but rather toward the socialist movement, parties, or existing states. Some critics consider socialism to be a purely theoretical concept that should be criticized on theoretical grounds, such as in the economic calculation problem and the socialist calculation debate, while others hold that certain historical examples exist and that they can be criticized on practical grounds. Because there are many types of socialism, most critiques are focused on a specific type of socialism, that of the command economy and the experience of Soviet-type economies that may not apply to all forms of socialism as different models of socialism conflict with each other over questions of property ownership, economic coordination and how socialism is to be achieved. Critics of specific models of socialism might be advocates of a different type of socialism.
The law of the value of commodities, known simply as the law of value, is a central concept in Karl Marx's critique of political economy first expounded in his polemic The Poverty of Philosophy (1847) against Pierre-Joseph Proudhon with reference to David Ricardo's economics. Most generally, it refers to a regulative principle of the economic exchange of the products of human work, namely that the relative exchange-values of those products in trade, usually expressed by money-prices, are proportional to the average amounts of human labor-time which are currently socially necessary to produce them within the capitalist mode of production.
Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources between and within organizations contrasted with the market mechanism. As an allocation mechanism for socialism, economic planning replaces factor markets with a procedure for direct allocations of resources within an interconnected group of socially owned organizations which together comprise the productive apparatus of the economy.
Labour vouchers are a device proposed to govern demand for goods in some models of socialism and to replace some of the tasks performed by currency under capitalism.
Criticisms of the labor theory of value affect the historical concept of labor theory of value (LTV) which spans classical economics, liberal economics, Marxian economics, neo-Marxian economics, and anarchist economics. As an economic theory of value, LTV is widely attributed to Marx and Marxian economics despite Marx himself pointing out the contradictions of the theory, because Marx drew ideas from LTV and related them to the concepts of labour exploitation and surplus value; the theory itself was developed by Adam Smith and David Ricardo. LTV criticisms therefore often appear in the context of economic criticism, not only for the microeconomic theory of Marx but also for Marxism, according to which the working class is exploited under capitalism, while little to no focus is placed on those responsible for developing the theory.
Economic Calculation in the Socialist Commonwealth is an article by Austrian School economist Ludwig von Mises. Its critique against economic calculation in a centrally planned economy triggered the decades-long economic calculation debate.
Production for use is a phrase referring to the principle of economic organization and production taken as a defining criterion for a socialist economy. It is held in contrast to production for profit. This criterion is used to distinguish communism from capitalism, and is one of the fundamental defining characteristics of communism.
The socialist mode of production, also known as socialism or communism, is a specific historical phase of economic development and its corresponding set of social relations that emerge from capitalism in the schema of historical materialism within Marxist theory. The Marxist definition of socialism is that of production for use-value, therefore the law of value no longer directs economic activity. Marxist production for use is coordinated through conscious economic planning. According to Marx, distribution of products is based on the principle of "to each according to his needs"; Soviet models often distributed products based on the principle of "to each according to his contribution". The social relations of socialism are characterized by the proletariat effectively controlling the means of production, either through cooperative enterprises or by public ownership or private artisanal tools and self-management. Surplus value goes to the working class and hence society as a whole.
Social ownership is a type of property where an asset is recognized to be in the possession of society as a whole rather than individual members or groups within it. Social ownership of the means of production is the defining characteristic of a socialist economy, and can take the form of community ownership, state ownership, common ownership, employee ownership, cooperative ownership, and citizen ownership of equity. Within the context of socialist economics it refers particularly to the appropriation of the surplus product produced by the means of production to society at large or the workers themselves. Traditionally, social ownership implied that capital and factor markets would cease to exist under the assumption that market exchanges within the production process would be made redundant if capital goods were owned and integrated by a single entity or network of entities representing society. However, the articulation of models of market socialism where factor markets are utilized for allocating capital goods between socially owned enterprises broadened the definition to include autonomous entities within a market economy.
Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist systems that utilize markets for allocating capital goods and factors of production among economic units are designated market socialism. When planning is utilized, the economic system is designated as a socialist planned economy. Non-market forms of socialism usually include a system of accounting based on calculation-in-kind to value resources and goods.
The socialist calculation debate, sometimes known as the economic calculation debate, was a discourse on the subject of how a socialist economy would perform economic calculation given the absence of the law of value, money, financial prices for capital goods and private ownership of the means of production. More specifically, the debate was centered on the application of economic planning for the allocation of the means of production as a substitute for capital markets and whether or not such an arrangement would be superior to capitalism in terms of efficiency and productivity.
Labor-time calculation is a method of economic calculation that uses labor time as the basic unit of accounting and valuation. This method of calculation was advocated by the economists Otto Bauer, Helene Bauer and Otto Leichter as an alternative to calculation in kind for a socialist economy. Otto Leichter criticized in-kind calculation on the basis that rational accounting required a general unit for comparing costs of heterogeneous goods.
This glossary of economics is a list of definitions of terms and concepts used in economics, its sub-disciplines, and related fields.
This article is about scholarly criticism of Karl Marx’s idea about the form of value in capitalist society. Marx himself provided a first starting point for this scholarly controversy when he claimed that Capital, Volume I was not difficult to understand, "with the exception of the section on the form of value." Friedrich Engels argued in his Anti-Dühring polemic of 1878 that "The value form of products... already contains in embryo the whole capitalist form of production, the antagonism between capitalists and wage-workers, the industrial reserve army, crises..." Nowadays there are many scholars who feel that Marx’s theory of the value-form was misinterpreted for a hundred years. This allegedly had effect that the radical meaning of Marx’s critique of capitalism as a whole was misunderstood or diminished, so that it became just another version of economics.
Towards a New Socialism is a 1993 non-fiction book written by Scottish computer scientist Paul Cockshott, co-authored by Scottish economics professor Allin F. Cottrell. The book outlines in detail a proposal for a complex planned socialist economy, taking inspiration from cybernetics, the works of Karl Marx, and British operations research scientist Stafford Beer's 1973 model of a distributed decision support system dubbed Project Cybersyn. Aspects of a socialist society such as direct democracy, foreign trade and property relations are also explored. The book is, in the authors' words, "our attempt to answer the idea that socialism is dead and buried after the demise of the Soviet Union."
The term 'calculation in kind' is normally reserved for attempts to dispense with any general unit of calculation. It is usually not taken to include cases where a general unit of calculation is arrived at without reference to money or markets. Thus it is not applied to Taylor-Lange accounting prices, nor to notional 'prices' ascribed to all commodities in an attempt to replace the market by solving a large number of simultaneous equations, nor to the use of labor time as a measure of cost.
In the years between 1917 and 1925 Viennese socialists were heavily engaged in disputes about these themes. Among the main contributors were O. Neurath, K. Polanyi, O. Baur, O. Leichter and W. Schiff... Much of this early discussion turned round the question whether planning should be in physical quantities or whether monetary accounting should be used. Otto Neurath, a remarkable personality, was a forceful advocate of physical planning.