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 5: The Unjustified Shift in the Debate Toward Statics: The Arguments of Formal Similarity and the So-called ‘Mathematical Solution’

Jesús Huerta de Soto

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


5. The unjustified shift in the debate toward statics: the arguments of formal similarity and the so-called “mathematical solution” This chapter will show that once Mises issued his initial challenge, the socialist participants in the debate quickly centered their efforts on solving the problem that socialism would pose in a strictly static sense. These efforts were totally unnecessary, and thus this shift of the socialist theorists toward statics is described as “unjustified”, given that Mises himself had already indicated that socialism did not present any problem of economic calculation at all in static terms. The chapter will attempt to explain why the socialists so completely misunderstood the nature of the problem to be discussed. Specifically, it will analyze the destructive effect exerted on the debate by both the paradigm of economic equilibrium analysis and the arguments developed to show the formal similarity which exists in strictly static terms between the market and the socialist model. Then the chapter will examine the “mathematical solution”, which socialist theorists proposed in several versions, and conclude with an analysis of the response that Mises, Hayek and Robbins gave to this whole set of solution proposals. 1 THE ARGUMENTS OF FORMAL SIMILARITY In the last chapter, we saw that the longest-standing school of thought within the socialist tradition naively maintained that a socialist system could dispense with the economic concepts of value and interest, which classical theorists had discovered and analyzed for capitalist economies. In response to this position, different economists hastened to show that...

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