Socialism, Economic Calculation and Entrepreneurship

Socialism, Economic Calculation and Entrepreneurship

New Thinking in Political Economy series

Jesús Huerta de Soto

This highly topical book presents a new theory on the characteristics of entrepreneurial knowledge. It explores the recent shift among professional economists and scholars in their evaluation of the debate of socialism. Socialism, Economic Calculation and Entrepreneurship presents an application of Israel M. Kirzner’s theory of entrepreneurship to the theory of the impossibility of socialism. It discusses the influence of the fall of socialism, with particular reference to the evolution of economic thought.

Chapter 4: Ludwig von Mises and the Start of the Debate on Economic Calculation

Jesús Huerta de Soto

Subjects: economics and finance, austrian economics, history of economic thought, political economy, politics and public policy, political economy


In this and the following chapters, we propose to closely analyze the debate on the impossibility of economic calculation in socialist economies. The scientific stature of the figures involved in the debate, its theoretical depth, and the influence it has had on the subsequent development of our science make it one of the most portentous debates in the history of economic thought. The chapters will cover each author’s most important contributions, along with the stages and most significant facets of the controversy. Also, there will be a critical analysis of the most widespread version (which this author believes is erroneous), of its content and development, and an attempt to offer various explanations for its predominance up until recent times. This initial chapter will begin by examining the historical background to the debate and studying in detail the essential contribution of Ludwig von Mises which sparked it. 1 BACKGROUND Only the emergence of an adequate understanding of the workings of society and the market as a spontaneous order which arises from the constant interaction between millions of people could, in the history of economic thought, make it obvious that socialism is an intellectual error, and thus impossible in both theory and practice. Although the tradition of the view of society that has been presented in the last two chapters dates back more than two thousand years,1 it is true that its development throughout the centuries has been a very arduous one in constant conflict with the constructivist rationalism which justifies...

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