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Writes Dan Sanchez:

In my recent article “How Statism Drove Iraqis into the Arms of Terrorists: The Tragic Story of Fallujah,” I quoted the following passage from Lew Rockwell’s new book Against the State, in which he sums up Mises’s theory of the socialist calculation problem and applies it to the U.S. government’s attempt to centrally plan the reconstruction of Fallujah, Iraq.

Why does socialist central planning not work? The means of production are not held privately, so there cannot be any exchange markets for them and therefore no exchange ratios established. That means there is no way to calculate profit and loss. Without profit and loss, there is no way to assess the tradeoffs associated with alternative uses of resources. That means there is no economy in the literal sense of that term.Let’s say there is only a limited amount of gasoline. Should it be used to fuel trucks to haul debris away, run construction equipment to put in power plants, or used to move building materials in for new schools and roads? There is no way to assess the relative merit of these choices. The same is true for every resource. What is the priority? It ends up being an arbitrary decision by the central planners. In this case, that arbitrariness ends up with Fallujah residents who can view home videos on Youtube but can’t get a drink of water without acquiring a deadly infection.

Lew’s new book is full of passages just like this: clear and pithy explanations and illustrations of vitally important truths. It is a great book to give to anyone still clinging to a residual faith in that archenemy of humanity, the State.

2:49 pm on June 20, 2014