Socialist Calculation Debate

The socialist calculation debate focuses on the possibility of an optimal allocation of scarce resources between alternative uses, made by a rational individual, within the institutional framework of a socialist economy. Several economists belonging to both the Lausanne School and the Austrian School agreed that, under narrow conditions, a rational allocation of resources within a socialist economy may have been conceived in theory, although emphasising the factual obstacles preventing the existence of a similar case in practice. Another group of economists showed the possibility of a rational functioning of socialist economies but they also turned such critique on capitalist economies (particularly after 1929 breakdown), emphasising that a socialist economy can actually work better than a capitalist economy. Behind the façade of science, however, economists’ attempt at shaping public opinion revealed a deep connection with their contemporary political milieu.