Socialist Finance and Economic Calculation

The lessons from Ludwig von Mises continue to resonate as Congress completes “negotiation” for its latest heist. Mises emphatically noted again and again that socialism fails because the players cannot engage in correct economic calculation.

So, what do we see here? We see “negotiators” from Congress and the executive branch “negotiating” over things that none of them own. None of them had a true economic stake in the financial system, so they could direct money toward those things which provided the greatest political benefits to themselves. In 2003, it became painfully obvious that Fannie and Freddie were headed for a major train wreck, but the political classes did not want to stop their personal cash cows.

Furthermore, the Bushies did not want to be seen as standing in the way on their nonsensical “ownership society” initiatives, cheered on by the Beltway “conservative and libertarian” think tanks. Again, the issue of economic calculation comes to the fore. No one in the Beltway who was determining the direction of investment had any kind of true ownership stake.

Instead of permitting financial resources to be directed toward their highest-valued economic uses, the political classes forced resources to be directed toward their highest-valued political uses. We see the unhappy results.

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7:50 am on September 28, 2008