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Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered
Rivalry and Central Planning, first published in 1985, is a vital contribution to the scholarly literature in contemporary comparative systems, the economics of socialism, and the Austrian school of economics. It disputes the commonly accepted view of both the nature of the “socialist calculation debate” of the 1930s and the lessons to be derived from it.
Whereas many socialist and Austrian participants in the debate tended to talk in polar terms of central planning versus the market, the chief result of the controversy has been that the neoclassical “market-socialist” position is usually taken to represent a successful synthesis of planning and markets. Don Lavoie, however, argues that the famous debate has been largely misunderstood.
The debate can no longer be viewed as a dated battle between extreme positions that have now become comfortably reconciled, as Lavoie insists that market socialists did not answer the Austrian school’s chief concerns about the challenges associated with rationally allocating resources. Rather, the lesson is that planning and markets are fundamentally alternative coordination mechanisms and that the attempt to combine them tends to subvert the operation of each.
Praise for the Book
“When it was first published in 1985, Don Lavoie’s revisionist account of the socialist calculation debate immediately became a seminal document in the Austrian revival. The book not only demonstrates the flaws of central planning but also shows why so
many economists, in thrall to equilibrium theorizing, missed the essential points of the Austrian critique. The Mercatus Center’s reissuing of this important book is very welcome indeed.”
—Bruce Caldwell, Director of the Center for the History of Political Economy at Duke University
“Rivalry and Central Planning was an important book when it was first published in 1985, and 30 years later it is still well worth scholarly attention. As the first detailed examination of the economic calculation debate from an Austrian perspective, Lavoie not only demonstrated the shortcomings of the socialist position but also provided a critique of much of mainstream economic theory. His emphasis on
the central importance of rivalry among competitors captured the central feature of a market economy that leads to innovation and economic growth. It is a classic, and I am delighted that this book will now once again be in print for a new generation of economists.”
—Karen Vaughn, author of Austrian Economics in America: The Migration of a Tradition
Whereas many socialist and Austrian participants in the debate tended to talk in polar terms of central planning versus the market, the chief result of the controversy has been that the neoclassical “market-socialist” position is usually taken to represent a successful synthesis of planning and markets. Don Lavoie, however, argues that the famous debate has been largely misunderstood.
The debate can no longer be viewed as a dated battle between extreme positions that have now become comfortably reconciled, as Lavoie insists that market socialists did not answer the Austrian school’s chief concerns about the challenges associated with rationally allocating resources. Rather, the lesson is that planning and markets are fundamentally alternative coordination mechanisms and that the attempt to combine them tends to subvert the operation of each.
Praise for the Book
“When it was first published in 1985, Don Lavoie’s revisionist account of the socialist calculation debate immediately became a seminal document in the Austrian revival. The book not only demonstrates the flaws of central planning but also shows why so
many economists, in thrall to equilibrium theorizing, missed the essential points of the Austrian critique. The Mercatus Center’s reissuing of this important book is very welcome indeed.”
—Bruce Caldwell, Director of the Center for the History of Political Economy at Duke University
“Rivalry and Central Planning was an important book when it was first published in 1985, and 30 years later it is still well worth scholarly attention. As the first detailed examination of the economic calculation debate from an Austrian perspective, Lavoie not only demonstrated the shortcomings of the socialist position but also provided a critique of much of mainstream economic theory. His emphasis on
the central importance of rivalry among competitors captured the central feature of a market economy that leads to innovation and economic growth. It is a classic, and I am delighted that this book will now once again be in print for a new generation of economists.”
—Karen Vaughn, author of Austrian Economics in America: The Migration of a Tradition
- GenresEconomics
228 pages, Paperback
First published May 31, 1985
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Displaying 1 - 5 of 5 reviews
August 22, 2024
Lavoie is my favorite Austrian economist so far, he is intellectually honest, knows his Marx and is acquainted with the Marxist tradition. I don't think you will find a lot of Austrians who discuss Kozo Uno's interpretation of Marx. This book, and his other book on national economic planning, is a must for socialists, progressives and Marxist to engage with.
August 25, 2019
Written with stellar clarity, Lavoie's re-examination of the Socialist Calculation Debate is both historically interesting and forward-looking in its confident reassertion of the modern Austrian perspective. Sure, it doesn't bring much new to the table, since it relies exclusively on the Mises-Hayek argument, but it surveys the scene with competence and plants its flag with bravado.
The central argument of the book is that the Austrian theory of the competitive market process, which allegedly underlies both Mises's and Hayek's theses in the debate, is a dynamic process theory of change that cannot be captured by neoclassical equilibrium models based on static assumptions of given knowledge, given technologies, given resource availability, etc. The failure of socialist calculation depends upon a fuller understanding of the role of entrepreneurship and institutions in managing risk, uncertainty, dynamic change, complex adaptation, etc. According to the author, the failure of the market socialists to fully understand the theory, and the failure of the Austrians to fully articulate it, led to a general state of impasse in the historical debate.
For the most part, the author does a pretty good job explaining all sides of the argument despite his professed love of and commitment to the Austrian cause. But I will subtract one star for the excessively generous treatment by which the author handles the Austrian side of the argument according to which they were always one step ahead of the opposition and never strayed from the one true path. The flip-side of this, of course, is the author's ungenerous treatment of the other side (although curiously not of Marx, who is given a VERY generous reading as a fellow disequilibrium theorist against the neoclassical mainstream!). This is reflected in the book's failure, in the middle act, to make a convincing positive case for the market socialist argument.
This, however, is the only major shortcoming in an otherwise excellent and clear treatise. The book is a very good introduction to and summary of the debate from the Austrian side.
The central argument of the book is that the Austrian theory of the competitive market process, which allegedly underlies both Mises's and Hayek's theses in the debate, is a dynamic process theory of change that cannot be captured by neoclassical equilibrium models based on static assumptions of given knowledge, given technologies, given resource availability, etc. The failure of socialist calculation depends upon a fuller understanding of the role of entrepreneurship and institutions in managing risk, uncertainty, dynamic change, complex adaptation, etc. According to the author, the failure of the market socialists to fully understand the theory, and the failure of the Austrians to fully articulate it, led to a general state of impasse in the historical debate.
For the most part, the author does a pretty good job explaining all sides of the argument despite his professed love of and commitment to the Austrian cause. But I will subtract one star for the excessively generous treatment by which the author handles the Austrian side of the argument according to which they were always one step ahead of the opposition and never strayed from the one true path. The flip-side of this, of course, is the author's ungenerous treatment of the other side (although curiously not of Marx, who is given a VERY generous reading as a fellow disequilibrium theorist against the neoclassical mainstream!). This is reflected in the book's failure, in the middle act, to make a convincing positive case for the market socialist argument.
This, however, is the only major shortcoming in an otherwise excellent and clear treatise. The book is a very good introduction to and summary of the debate from the Austrian side.
February 8, 2021
Good stuff. I'm taking a class on Austrian economics as an independent study. I know I'm predisposed to ideas that seem libertarian-ish, and I like the novelty of interesting, new arguments.
Thoughts:
I think the recontextualization of the calculation debate is an interesting thing to devote resources too. It's not really something I've learned much about in my other economics classes. I'm not really sure why, but reading this, and its foil, the standard account, are interesting.
I think the book was pretty generous to Marx, and intellectual generosity is something to be valued, and something that I think made this book a page turner.
I also enjoyed the chapter on Mises because it gives something in between a birds eye view, and getting too stuck in the weeds.
Thoughts:
I think the recontextualization of the calculation debate is an interesting thing to devote resources too. It's not really something I've learned much about in my other economics classes. I'm not really sure why, but reading this, and its foil, the standard account, are interesting.
I think the book was pretty generous to Marx, and intellectual generosity is something to be valued, and something that I think made this book a page turner.
I also enjoyed the chapter on Mises because it gives something in between a birds eye view, and getting too stuck in the weeds.
February 18, 2021
"This does not, however. reduce to the mere question of "incentives" in the narrow sense of psychological motivation. The "incentives" of the profit and loss system do not merely motivate action; they inform it." This is a fantastic book, but make sure you have a good ground in Austrian capital theory. I would also read The Capitalist and The Entrepreneur by Peter G. Klein. Don Lavoie fills the reader in where they may feel wanting upon reading Economic Calculation in the Socialist Commonwealth (Mises' original work still needs to be read).
September 24, 2016
Lavoie performs a minor miracle by revising this intellectual history of the socialist calculation debate while fascinating the reader. He makes a strong case that historians of thought have misinterpreted the debate.
If you don't have time to read the book, just read the last chapter. It provides a beautiful summary of Lavoie's argument in only 5 pages. If you do, you may change your mind and start at the beginning. Lavoie writes clearly and illustrates the difference between the sterile formalisms of contemporary neoclassical economics and the emphasis on dynamic change that characterized Mises' and Hayek's contributions to the debate.
If you don't have time to read the book, just read the last chapter. It provides a beautiful summary of Lavoie's argument in only 5 pages. If you do, you may change your mind and start at the beginning. Lavoie writes clearly and illustrates the difference between the sterile formalisms of contemporary neoclassical economics and the emphasis on dynamic change that characterized Mises' and Hayek's contributions to the debate.
Displaying 1 - 5 of 5 reviews