The general lines of Ludwig von Mises’s rational-calculation argument are well known. A market in factors of production is necessary for pricing production inputs so that a planner may allocate them rationally. The problem has nothing to do either with the volume of data or with agency problems. The question, rather, as Peter Klein put it, is “[h]ow does the principal know what to tell the agent to do?”
This calculation argument can be applied not only to a state-planned economy, but also to the internal planning of the large corporation under interventionism, or state capitalism.
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