...F. A. Hayek’s distinctive contribution to the socialist calculation debate, over and above that of Ludwig von Mises,[1] was essentially to ask where the data might be found to do economic calculation about consumers’ preferences themselves. (And by extension, producers’ preferences.)
Who has that data? The simplest answer is that everyone has a tiny little piece of it. It’s dispersed among all of us, because each person has a list of consumption goods that they may desire to varying degrees in varying circumstances, as various needs and opportunities arise.
Whenever the needs and opportunities align just so, a given consumer good rises to the top of our list. And we act to acquire it. When we do, prices will emerge.
Yet prices only tell us a part of the story — they tell us that buyers and sellers were able to agree at a given time and place. Often, prices can signal an opportunity, as when a supplier discovers that he or she can undercut the current market price and realize a profit.
But prices in themselves say nothing about other possible agreements that might have arisen in other circumstances. They also say very little about the future: As soon as a price occurs, it’s history. The entrepreneur who discovers that he or she can undercut the current market price still has to get to market. That takes time, and when they get there, the market price may have changed. That’s a risk that entrepreneurs have to take. Consumer demand is fickle and inherently hard to predict.
It’s also very likely that you can’t articulate beforehand just what your list of preferred consumer goods really looks like, including how much you would buy of various goods at various prices. No one really can.
Your list also probably changes very rapidly. Every unexpected event alters your preference set to some degree. Every disaster, every unexpected discovery, every windfall, and every loss. Every new product you didn’t know about before. Every old product that disappears from the market. Every single change upsets everything — all in a hierarchy of values that you can’t even begin to articulate in the first place.
Weirder still: There are items on your “list” that you don’t know about and never will.
It sounds very strange to put it that way, I know. But we have all had an experience that demonstrates it. We’ve all at one time or another walked into a store, discovered a product, and then bought it — all while having known nothing about it in advance.
Here we must start speaking of a “list” of consumer demands only for want of a better term. If it were to be drawn up comprehensively, such a list would include an infinite number of products, past and present, that aren’t generally available on the market, that are unknown to any of us, and that are therefore of unknown subjective value. Until the opportunity arises, and we act, and only then do potential entrepreneurs get a glimpse into consumer demand.
Much like the concept of a “good” — covered in part two — the concept of a consumer demand hierarchy is a conceptual crutch. It’s not a real thing at all. Markets reveal preferences, but in a sense they also make preferences, because consumers choose only among those options that are available to them, and because we can only speak then, in retrospect, about their having acted as if there were a hierarchy of wants.
Consumers have preferences, no question. They act on those preferences. But can they articulate them? Not in the way that we would need to do planning.
As a result, socialist calculation can’t ever really get off the ground. At least not without some kind of incredibly reliable and thus very probably dystopian brain scanning technology. While we’re at it, we’d need a complete knowledge of all upcoming natural disasters, technological changes, fads, and cultural phenomena that will arrive in the near and distant future. This though is an impossibility — if we knew what technologies or cultural developments the future held, we would have them right now, and they wouldn’t be “future” developments at all.
But without them, we can’t reliably model of consumer preferences over time. And without that, we can’t predict the value of capital goods over time either...
libertarianism.org |
