I’ve been otherwise occupied for a little while, but let me pick up a theme via:

Peter Hume said
“Economically, communism, socialism and interventionism are all the same thing. They are attempts to replace production based on voluntary exchange and private property, with production based on governmental ownership or control of some kind.”

I think a lot of this discussion is still very channeled by the old socialist/capitalist false dichotomy. I’ll pick up two points.

Peter – “intervention” does not just mean government ownership. It includes taxes, subsidies and regulations. For example, a recent estimate was that fossil fuels are subsidised, via tax breaks etc., by $9 billion per year in this country. That is a gross distortion of our energy market. We are subsidising greenhouse gas emissions, paying extra to degrade the planet. If we just eliminated such perverse subsidies we’d have a lot healthier society. It’s a straightforward proposition, you don’t have to go off into arcane debates about National Socialism etc. (and remember, whoever mentions Hitler first in a debate loses ☺ ).

Everyone –
Underpinning most of this discussion is the idea that unfettered markets are intrinsically superior. Call if “voluntary exchange” if you like Peter, but that could include trading heroin, or Shell trashing the Niger delta and BP trashing the Gulf of Mexico. Sensible people want some restraints imposed. Again, you don’t need a great philosophical debate.

More follows -

Now, the central point. The theory that is purported to demonstrate that free markets are optimal is an absurdly unrealistic theory. It assumes we can all foretell the future, are never influenced by fashion, are “rational”, are not affected by third parties, etc. etc., and that there are no economies of scale. Change any one of these assumptions and you predict, instead of an optimal “general equilibrium”, a system full of instabilities, a complex self-organising system, a system in which it does not even make sense to talk about “optimal”.

This means the core of “free market” economics is nonsense. There is no reason at all to expect free markets to deliver anything desirable, but rather to do what anarchy always does – leave the field free for warlords to take over. The core of neoclassical economics is gone, Hayek is gone, all that stuff about abstract “freedom” is gone. It’s a fantasy.

What is left is what common sense would suggest to many people. We can organise our economy to suit our culture and our goals. We can even organise it to be compatible with the living world instead of trashing it.

You can read my posts
http://betternature.wordpress.com/2009/03/02/neoliberalism-was-always-rubbish/
http://www.onlineopinion.com.au/view.asp?article=8644

Or read my book
http://betternature.wordpress.com/economia/

The way of living things is that there is a natural and healthy tension between the wants and needs of an individual and the wants and needs of the larger entity – the group, the society, the ecosystem, the total organism, whatever. Maggie Thatcher was right – if we follow her and Hayek then it follows that “there is no such thing as society”. But human beings, like all mammals, are innately social. You balance individual needs and social needs.

The twentieth century featured two great experiments. One was dedicated to total cooperation – it failed. The other was dedicated to total competition – it is failing. These are simplistic and extremely damaging views of the human condition. We need to move on from them.

Paul, Geoff
You don’t seem to be understanding the issue.

Let’s say our purpose is to safeguard the virtues of socialism or “society”. Well why not do it through a fully socialist government: by complete public ownership of all the means of production?

Because we already know it won’t work, and will produce negative consequences that are much much worse than the original problem.

Now before the Nazis and the Soviets provided the disproof in practice, libertarians already knew from *theory* that it couldn’t work, that it would and could only result in totalitarian government and planned economic chaos.

How did they know this in theory? Because the whole point of economic behaviour, is to be able to know what is a more, and what is a less economic way of doing things. Otherwise we would be more wasteful, we would be using scarce resources to satisfy less urgent needs instead of satisfying more urgent needs – like producing Black Sea holiday dachas for privileged apparatchiks instead of food for the masses; like pink batts to save the planet, instead of teaching children to read and write properly.

Under capitalism, we are able to know whether it’s more economical to build a house out of timber or steel or turf or platinum, because we are able to compare prices, money prices. But prices are a market phenomenon. If there was only one owner of all capital goods – the government - then there would be no market for capital goods. Therefore there would be no prices for capital goods. There would be no prices to tell which of various ways of producing something was more economical. This is the rock on which socialism foundered.

The result would not be an alternative economic system: it would be the abolition of rational economic decision-making. The government central planners could only directly compare quantities of physical goods. But a modern economy is too complex to make that viable.

They would be reduced to the economic competence of a barter economy, and everyone living above that level would be in danger of starvation ...

...and poverty – as well as the abuses of totalitarian power. Which is exactly what happened.

But, you might say, under a mixed economy, we don’t have total government control – we also have private enterprise. That is true, but the same problem of economic calculation affects everything the government does.

Government’s waste, incompetence and destuctiveness, as concerns pink batts, and school buildings, and public transport, and public hospitals, and broadband, and the Niger Delta, is not a coincidence.

So far as government owns or controls the use of particular resources, it is incapable of economic calculation. It can perform this necessary function only by reference to prices issuing out of the private sector. Thus in itself, and the more it grows, government can only generate planned economic chaos and arbitrary political privilege in everything it does, because it can’t do anything else, because it has disabled itself from doing anything else. This is what the leftists keep on not understanding, or ignoring.

In a mixed economy, the government confiscates about 40 to 50 percent of the everything the productive class produces. If the gubbas just took this as salary and didn’t turn up for work, we would actually all be better off. Because all the interventions they spend the money on, are the main cause of the poverty, disadvantage, unemployment, fat-cat privileges, environmental destruction and social divisiveness that the leftists are tying to fix by expanding government.

The real class war is between the exploited productive class who get their money by consent – the private sector - and the exploiting parasitic class who get their money by violence and threats – the gubbas and their dependants.

Geoff, Hayek and the Austrian school never ascribed to markets the fictional assumptions that you rightly dismiss. The vindication of markets does not depend on these fictions; it is not necessary to claim that they produce “optimal”, “equilibrium”, “perfectly rational” outcomes. It suffices to show that public ownership can’t do better – comparing apples with apples.

Now please answer my question showing *how* interventionist government avoids the economic calculation problem.

You might need to open both eyes, Peter Hume.

>>Government’s waste, incompetence and destuctiveness, as concerns pink batts, and school buildings, and public transport, and public hospitals, and broadband, and the Niger Delta, is not a coincidence<<

Under the heading of waste, incompetence and destructiveness I would suggest you might include BP's frolic in the Gulf of Mexico, Goldman Sachs' adventures with mortgage backed securities, Lehman Brothers' long flirtation with cosmetic accounting gimmicks, MCI Worldcom's creative revenue recognition policies, Tyco's light-fingered chairman and CEO, and Parmalat's practice of selling itself its own CDOs, that eventually dug a $14 billon hole in it balance sheet.

Just for starters.

And we haven't even got as far as Enron, Arthur Andersen, HIH, Barings etc. etc.

Now, what was your point again...?

Ho-hum. Pericles trying to by run the argument into personal remarks and assuming what is in issue again. Three strikes and you’re out Pericles.

Geoff
So, what are the answers to the questions:
a) how is partial government control *economically* different from full government control, apart from the existence of the private sector?
b) How does partial government control avoid the economic calculation problem that inheres in total government control?