By Donald Lee

This short article is about communism. If you happen to like communism, pick whatever flavour of socialism you most despise. They are fundamentally all the same. 

We associate communism with the crazy ideas of Karl Marx. However, Karl Marx almost always spoke of socialism—communism simply being the end state. In a general sense, the ideology of socialism emphasizes the group over the individual. This creates a whole host of problems that are impossible to solve. The following is the first of these problems. 

The Impossibility of Economic Calculation

Socialism moves a nation away from individual decision-making and towards ever more centralized decision-making by the government. This is perhaps the most obvious outward sign of all forms of creeping totalitarianism. This increasingly creates economic disorder. To understand how this works, consider for a moment how every one of us makes economic decisions. 

Every day, we make decisions about buying and selling, including selling our labour for money. Each decision is based on our assessment of price versus value. For example, if you buy some apples in the grocery store, you are valuing the apples more highly than the money you give up in exchange for them. Perhaps last week you did not purchase apples, even though the price was the same and you had an ample supply of money. 

All our decisions about value are individual, subjective, and change over time and space. There are any number of reasons why you purchased apples today and did not purchase apples last week. Maybe today you are out of apples, but last week you had several in your fridge. Maybe you don’t like apples at all, yet have decided to bake an apple pie for the church picnic on Sunday. The reasons for our valuations are unknown to everyone else and often even unknown to ourselves, since we are also motivated by unconscious urges. 

Over a century ago, economists finally realized this and developed the Subjective Theory of Value—possibly the most important principle in economics. No one else can ever determine value for you, nor can any computer, not even an artificially intelligent computer. The necessary information is always unknown and unknowable. Not even God can decide your valuations for you. God doesn’t even try. Instead, he gives you free will. This is the fundamental reason why central planning can never work. 

The individual economic decisions each of us makes every day determine the optimum allocation of resources in the world at any given time. It is impossible that central decision-making can ever have enough information to make decisions for even one person, much less all the billions of people in the world. 

Everything has a price, so everyone is able to compare the prices for goods and services to their own individual valuations at every moment in time and space. Understanding the Subjective Theory of Value and the Price System is all that is needed to put an end to the nonsense of central planning. What works best is to have as little government planning as possible. Then the decisions of billions of individual people almost miraculously determine what goods and services should be produced, by what production methods, and who should get what. We could call this a self-organizing collective. Greater prosperity and peace are found by moving towards empowering individuals, not by empowering the state.

Donald Lee is an author and speaker from Alberta. His recent books What the Hell Is Going On? and The Way Forward explain what is really going on in our world and what we can sensibly do about it. You can check out his writings at www.cominghomespirit.com.