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Thread: The Capitalist Price Obsolescence Problem: Why Von Mises Is Wrong and Prices Will Die

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    The Capitalist Price Obsolescence Problem: Why Von Mises Is Wrong and Prices Will Die

    A while ago I said I would posting a rebuttal to monetary capitalist's. It turns out it is more of a question preceding from their own response to socialism than a rebuttal, however.

    Some people on Reddit have expressed dissatisfaction with my argument, neither accepting nor dismissing its conclusion.

    My hypotheses is present below. You can accept it or dismiss it, of course.

    However, as TZM is a collaborative movement and this is, no doubt, a collaborative forum, I invite those who see possibility in my conclusion but question my the efficiency of my argument, to provide perhaps a better argument for my conclusion.

    In other words, despite whatever reservations you have about my overall argument, maybe we could brainstorm this problem to provide a stronger case in favor of my conclusion?

    Thanks for your consideration.


    The Capitalist Price Obsolescence Problem: Why Von Mises Is Wrong and Prices Will Die

    Capitalists today are quite vocal in making the claim that both Socialism and a Resource Based Economy, without pricing, have an economic calculation problem that causes the inefficient use and distribution of resources. Of course, this alleged flaw was first pointed out most famously by Ludwig Von Mises in the early 1920's in regards to a priceless socialist commonwealth.

    However, as I will expand on, Von Mises was committing a great miscalculation of his own in failing to take into account and foresee the impact that automation will have on pricing within a monetary capitalist economic model.

    If we take the capitalist claim at face value and allow that any economic model will be blind without pricing, it must follow that Capitalism itself is no less susceptible to this blindness due to an absence of prices once full automation of labor and production is achieved.

    For if full (or even semi) automation of labor and production is achieved, there will no longer be a need for human labor to access and produce many (if not all) resources necessary for human survival and/or comfort.

    Without the need for human labor to produce anything, without a requirement to pay out wages and without a population with a wage income to make purchases, there is no need or possibility to charge a price for labor or the product of labor.

    But, again, without prices, capitalist's claim it would be very difficult to efficiently distribute resources.

    If all food is produced entirely indoors, under artificially controlled climates by free automated labor, for instance, how will a future society know how to distribute that food efficiently without prices? There are no wages to be paid thanks to automation or food scarcities to contend with due to weather thanks to indoor farming, so there is no need to put a price on food. No human is producing it. No human is demanding a wage for its production so how do you allocate food if it has no price due to full automation and no labor force with the income to purchase it?

    Additionally, if a resource is scarce in a fully automated world, such as a precious mineral of some kind, you cannot demand a price for it under a fully automated world where no one is working and therefore are not receiving any wages to expend on the purchasing of scarce resources. And if presumably any scarce resources were substituted for with renewable resources, the pricing problem becomes even more difficult for the capitalist. Why put a price on a resource that is not scarce and does not require human labor to fashion into a consumable product or wages to be paid out for its production? Disregarding the lack of a paid human workforce in a fully or semi automated world where there are no wages with which to buy scarce resources, capitalist's think they are being smart when they respond at this point by saying that it doesn't matter if work becomes automated...scarce materials and resources, by the mere fact of being scarce, will still demand a price and thus preserve the necessity for monetary exchange. But this is actually not a very good response. Indeed, why even charge for a scarce resource such as a precious mineral if the basic, non-scarce resources you would spend the money on in exchange for that precious resource are already being provided to you free by free automated labor? At that point, even paying for scarce resources makes no sense.

    Another angle capitalist's will use to respond to the challenge posed by automation is to say ďpeople will just move from the automated jobs to non-automated jobs.Ē

    But when all the jobs that provide the basic necessities and comforts like food, shelter, healthcare, clothing, travel, etc have been automated and are available for free, what is the incentive to move into other jobs? There is no incentive. With automation the main necessities and comforts are covered for free. Why rent yourself out for work and a wage if the mainstays of your needs and comforts can already be covered by unpaid automation? The whole purpose of working other jobs is to get money because the basic resources and comforts produced by the former jobs weren't automated and free. However, when all jobs providing basic necessities and comforts are automated, all other jobs of monetary pursuit will be unnecessarily redundant. After all, why work those redundant paid jobs if all your needs and comforts are provided for by free automated labor? They can simply be engaged in as unpaid hobbies. In other words, all jobs don't have to be automated for work, and thus pricing, to be made obsolete, just the right jobs. Things like entertainment will be produced as unpaid hobbies by citizens who have been freed of the burden of working for their basic needs and comforts.

    This all comprises what I call the Capitalist Price Obsolescence Problem.

    Forget about socialism. Forget about a moneyless resource based economy. In a capitalist world of full or even semi automation, where there is no need to put a price on anything and no wages being paid, capitalist's would then be forced to face and solve the economic calculation problem themselves because pricing itself breaks down and becomes obsolete.

    Capitalists claim the economic calculation problem is unsolvable without prices as prices are largely needed to reflect the cost of the human labor involved in production and the value of scarce resources.

    But what I am suggesting is the economic calculation problem MUST be solved without prices because we are headed for a world where prices themselves are going to be phased out. In other words, not only do socialist's have to solve the economic calculation problem, but capitalist's will eventually HAVE to solve the same problem for themselves! With increasing automation, the economic calculation problem becomes just as much a problem for capitalists as it is for socialists.

    This, of course, turns into an unsolvable contradiction for capitalist's that insist on the necessity of prices in the face of a challenge to the very need for pricing by growing automation.

    And this problem is only going to get worse for capitalist's as automation and in-home means of production expand and take root in society.

    So I ask the free market monetary capitalist's what will you do?

    Let the claim and challenge be put forth today that...as long as capitalistís and advocateís of Von Misesís theory contend the Economic Calculation Problem is unsolvable without prices, they are, in effect, arguing that Capitalism itself will have to face and resolve the same dilemma as society becomes increasingly more automated.

    I have no doubt monetary capitalist's will soon be spending a great deal of time and energy trying to solve or refute the exact same gnawing problem they have subjected socialist's to all these many decades. And to that I say, welcome to the club. So nice of you to join us. Now letís get to work and solve this problem together.
    droneBEE likes this.
    "The stress of nature never ends, but at a certain level still other driving forces originate which put the whip to the creative power of man with a multiplied force... The new relations are detected first by a few (with the finest moral tentacles), afterwards by more, then they are consolidated in rules which begin to push aside the earlier moral code and in the end eliminate it."

    "They who decry the loss of masculinity the loudest, are certain of it in themselves the least."

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    Edit: Since it seems we can't edit or delete posts anymore (grrr!), I've fixed the typos in the repost below.

    A while ago I said I would be posting a rebuttal to monetary capitalist's. It turns out it is more of a question preceding from their own response to socialism than a rebuttal, however.

    Some people on Reddit have expressed dissatisfaction with my argument, neither accepting nor dismissing its conclusion.

    My hypotheses is presented below. You can accept it or dismiss it, of course.

    However, as TZM is a collaborative movement and this is, no doubt, a collaborative forum, I invite those who see possibility in my conclusion but question the efficiency of my argument, to provide perhaps a better argument for my conclusion.

    In other words, despite whatever reservations you have about my overall argument, maybe we could brainstorm this problem to provide a stronger case in favor of my conclusion?

    Thanks for your consideration.


    The Capitalist Price Obsolescence Problem: Why Von Mises Is Wrong and Prices Will Die

    Capitalists today are quite vocal in making the claim that both Socialism and a Resource Based Economy, without pricing, have an economic calculation problem that causes the inefficient use and distribution of resources. Of course, this alleged flaw was first pointed out most famously by Ludwig Von Mises in the early 1920's in regards to a priceless socialist commonwealth.

    However, as I will expand on, Von Mises was committing a great miscalculation of his own in failing to take into account and foresee the impact that automation will have on pricing within a monetary capitalist economic model.

    If we take the capitalist claim at face value and allow that any economic model will be blind without pricing, it must follow that Capitalism itself is no less susceptible to this blindness due to an absence of prices once full automation of labor and production is achieved.

    For if full (or even semi) automation of labor and production is achieved, there will no longer be a need for human labor to access and produce many (if not all) resources necessary for human survival and/or comfort.

    Without the need for human labor to produce anything, without a requirement to pay out wages and without a population with a wage income to make purchases, there is no need or possibility to charge a price for labor or the product of labor.

    But, again, without prices, capitalist's claim it would be very difficult to efficiently distribute resources.

    If all food is produced entirely indoors, under artificially controlled climates by free automated labor, for instance, how will a future society know how to distribute that food efficiently without prices? There are no wages to be paid thanks to automation or food scarcities to contend with due to weather thanks to indoor farming, so there is no need to put a price on food. No human is producing it. No human is demanding a wage for its production so how do you allocate food if it has no price due to full automation and no labor force with the income to purchase it?

    Additionally, if a resource is scarce in a fully automated world, such as a precious mineral of some kind, you cannot demand a price for it under a fully automated world where no one is working and therefore are not receiving any wages to expend on the purchasing of scarce resources. And if presumably any scarce resources were substituted for with renewable resources, the pricing problem becomes even more difficult for the capitalist. Why put a price on a resource that is not scarce and does not require human labor to fashion into a consumable product or wages to be paid out for its production? Disregarding the lack of a paid human workforce in a fully or semi automated world where there are no wages with which to buy scarce resources, capitalist's think they are being smart when they respond at this point by saying that it doesn't matter if work becomes automated...scarce materials and resources, by the mere fact of being scarce, will still demand a price and thus preserve the necessity for monetary exchange. But this is actually not a very good response. Indeed, why even charge for a scarce resource such as a precious mineral if the basic, non-scarce resources you would spend the money on in exchange for that precious resource are already being provided to you free by free automated labor? At that point, even paying for scarce resources makes no sense.

    Another angle capitalist's will use to respond to the challenge posed by automation is to say “people will just move from the automated jobs to non-automated jobs.”

    But when all the jobs that provide the basic necessities and comforts like food, shelter, healthcare, clothing, travel, etc have been automated and are available for free, what is the incentive to move into other jobs? There is no incentive. With automation the main necessities and comforts are covered for free. Why rent yourself out for work and a wage if the mainstays of your needs and comforts can already be covered by unpaid automation? The whole purpose of working other jobs is to get money because the basic resources and comforts produced by the former jobs weren't automated and free. However, when all jobs providing basic necessities and comforts are automated, all other jobs of monetary pursuit will be unnecessarily redundant. After all, why work those redundant paid jobs if all your needs and comforts are provided for by free automated labor? They can simply be engaged in as unpaid hobbies. In other words, all jobs don't have to be automated for work, and thus pricing, to be made obsolete, just the right jobs. Things like entertainment will be produced as unpaid hobbies by citizens who have been freed of the burden of working for their basic needs and comforts.

    This all comprises what I call the Capitalist Price Obsolescence Problem.

    Forget about socialism. Forget about a moneyless resource based economy. In a capitalist world of full or even semi automation, where there is no need to put a price on anything and no wages being paid, capitalist's would then be forced to face and solve the economic calculation problem themselves because pricing itself breaks down and becomes obsolete.

    Capitalists claim the economic calculation problem is unsolvable without prices as prices are largely needed to reflect the cost of the human labor involved in production and the value of scarce resources.

    But what I am suggesting is the economic calculation problem MUST be solved without prices because we are headed for a world where prices themselves are going to be phased out. In other words, not only do socialist's have to solve the economic calculation problem, but capitalist's will eventually HAVE to solve the same problem for themselves! With increasing automation, the economic calculation problem becomes just as much a problem for capitalists as it is for socialists.

    This, of course, turns into an unsolvable contradiction for capitalist's that insist on the necessity of prices in the face of a challenge to the very need for pricing by growing automation.

    And this problem is only going to get worse for capitalist's as automation and in-home means of production expand and take root in society.

    So I ask the free market monetary capitalist's what will you do?

    Let the claim and challenge be put forth today that...as long as capitalist’s and advocate’s of Von Mises’s theory contend the Economic Calculation Problem is unsolvable without prices, they are, in effect, arguing that Capitalism itself will have to face and resolve the same dilemma as society becomes increasingly more automated.

    I have no doubt monetary capitalist's will soon be spending a great deal of time and energy trying to solve or refute the exact same gnawing problem they have subjected socialist's to all these many decades. And to that I say, welcome to the club. So nice of you to join us. Now let’s get to work and solve this problem together.
    droneBEE, HAL9000 and Ernest like this.
    "The stress of nature never ends, but at a certain level still other driving forces originate which put the whip to the creative power of man with a multiplied force... The new relations are detected first by a few (with the finest moral tentacles), afterwards by more, then they are consolidated in rules which begin to push aside the earlier moral code and in the end eliminate it."

    "They who decry the loss of masculinity the loudest, are certain of it in themselves the least."

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    Excellent Post! Thanks for the effort.

    Now...if we can get some more members over to READ this...we may figure some things out
    fsir likes this.

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    What Von Mises is referring to in the economic calculation problem is that a free-market system is better at mitigating that problem than socialism; so technically there's nothing wrong with what he said. Another thing I'll point out is that capitalism and socialism are not opposites; socialism is capitalism with too much government intervention in the market & that's why it's also known as state capitalism. The economic calculation problem is a generic dilemma in capitalism (i.e., whether it's free-market or socialism) & it seems you do get that concept; all it's referring to things like having a formula to calculate the price, taking into account all the factors or variables that would be needed in order to determine what something should cost.

    Personally I think it goes beyond just being a calculation problem; I think even then it assumes things about incentives, altruism, etc. Anyways, what Von Mises is driving at is that the "next" best thing (but in effect the best thing because of the lack of solution for the most ideal thing) is to let someone selling something determine for themselves what they want to charge for it; let them decide if they want to go through the trouble of producing something or providing a service based on their ability to provide it and desire to part ways with it for a certain price. It's not perfect but it's the best and only thing that does the trick well. In fact maybe it's that error in a price being too high or too low that reveals what the real price is because of the feedback effect. It also lets people decide what criteria they want to apply. Sometimes people give things away for free, but it's for different reasons. In some cases it's because they're no longer valuable to them and they have to get rid of whatever it is because it's just taking up space; in other cases it's to promote their product, spread awareness. That's what free samples are for, because in the long run it means those who like the product will pay for more.

    Socialism (state capitalism) doesn't do that; it has some centralized source with its own set of fixed theories on what the price of something ought to be; this can be disastrous because if the price is set too low, too many people will buy whatever it is and the supply will run out. The ones who would be willing to pay the most for it are the ones who would benefit most from it, because in turn the rest of society benefits from it; socialism impedes that kind of progress and productivity. If the price is set too high, no one will buy whatever it is and a similar problem happens.

    I've heard people argue that the reason there were long bread lines in socialist countries is because the bread is terrible. That actually makes no sense at all; who would stand in such a long line just to get terrible bread? The reason there were such long bread lines is either because it was very good bread, very cheap bread, or a combination of both. In a free market, more bakers would open up shop; socialism is more inefficient I guess because someone has to write a report, someone has to approve something, someone has to allocate the money for setting up more bakeries, or whatever. It's not so much that socialism doesn't work, it's that it's not efficient; sometimes things like time is a factor & if some centralized bureau is trying to control too many aspects of the economy, the result is a loss of opportunity.

    A post scarcity system is the only one that conceptually would not have an economic calculation problem, since we already know what the price of everything would be and it would always be the same thing. When you have that, there's no need for high speed computers, centralized planning commissions, or even individuals trying to decide what to charge for something. We know the price of everything is zero. I agree with you, that it's automation, robotics, implementation of advancements in technology, etc. Things get so cheap that the price of everything goes down to zero.

    Demand for most things is really just intermediate; for example the demand for a car is really just demand for a reliable and convenient way to get to work, grocery store, etc. If we no longer need to go to work, we no longer need a car for that purpose; if we no longer need to drive to the grocery store for the purpose of getting food, because we have automated systems that'll bring us food, cook it or prepare it for us, etc., then we no longer need a car for that purpose, either. Those who want a car will still get one, assuming something much better doesn't come along and render it so obsolete that no one except a museum or renaissance group would want it.

    So basically our overall demand will reduce, and many things that we have today will go obsolete. My favorite thing is that crime, war, corruption, pollution, homelessness, abject hunger, etc. could all come to an end.

    Aside from the Von Mises, capitalism, and socialism semantics issues, I'd say that on one hand you're reiterating what we know; on the other hand it's worth repeating over and over, as many times as necessary to get the word out. So I'll say pretty good job, keep it up!

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    Thanks, Neil. It always great to get the perspective of others on the longstanding historical debate as it can be a complex topic and one always questions whether one's grasp of it is complete. You've added to my understanding.

    I'd be interested in being introduced to what other voices that have suggested capitalism will face a calculation problem with increasing automation.

    It seems such promising territory for which moneyless advocates can finally get capitalist's to shut up, I would love to see a professional and sharpened presentation of it delivered to capitalist's with much fanfare.
    droneBEE, HAL9000 and Ernest like this.
    "The stress of nature never ends, but at a certain level still other driving forces originate which put the whip to the creative power of man with a multiplied force... The new relations are detected first by a few (with the finest moral tentacles), afterwards by more, then they are consolidated in rules which begin to push aside the earlier moral code and in the end eliminate it."

    "They who decry the loss of masculinity the loudest, are certain of it in themselves the least."

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    But how can we ever really be sure what the Price of something is?

    Capitalism is an Outdated form of resource distribution. We accept using Prices but I think it's far from solving anything. I mean who really decides what Price something should be? If you leave that to Humans, forget coming up with any reasonable, fair representation of what something is worth in the Real World. And this is what it all really comes down to me. Basing things on our Opinions, Feelings, Ideas, Values ... .

    If we want true Rational Economics. We would be basing our Economics on our knowledge of what's available and what we are capable of producing. And not just leaving everything to what people think they want and can Pay for.
    droneBEE, fsir and HAL9000 like this.

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    That's a good presentation and I'd like to encourage you to continue your work!

    Quote Originally Posted by fsir View Post
    Edit: Since it seems we can't edit or delete posts anymore (grrr!), I've fixed the typos in the repost below.
    I can edit and delete. Try clearing your webcache or try another browser.

    But when all the jobs that provide the basic necessities and comforts like food, shelter, healthcare, clothing, travel, etc have been automated and are available for free, what is the incentive to move into other jobs?
    Some people like to work. You're assuming everyone works because they have to and I don't think that is true.

    Price= hours-worked / item.

    100 years ago it cost a person of median wage 10 hours of labor to buy 100lbs of sugar. Today it takes only 1 hour. If the curve is linear (but it's probably not) and assuming no protectionist policies are enacted against automation, it will be 6 minutes of labor in another century... for those who have a job and earn median income.

    Our extra production and efficiency is robust enough to not only translate into cheaper "prices" for the workers, but also increasingly support those unable to work. In other words, if a robot is doing your job, then you can sit at home and collect the pay.

    If a robot is doing your job, your employer gets to keep your pay, but then he pays it in taxes and it comes back to you. So, effectively, the robot is doing your job and you get the money. The employer gets to keep the extra efficiency produced by the robot which increases his standard of living as well. Everyone benefits, except some don't see that as "fair".
    _____________________________________________

    The problem of food allocation assumes a sudden transition from capitalism to RBE. I maintain it must evolve on its own rather than be implemented suddenly. Assuming no protectionist policies are taken against automation, then unemployment should rise to the point that UBI is established (because revolt or protectionism are the only alternatives). As taxation increases on the remaining workers, more drop out of the workforce and cause central banks to monetize welfare. At the point that we're merely printing money to give it away, money becomes meaningless. Life goes on as before, only without money. The process is slow enough that no one is traumatized.

    Many things that will happen are too difficult to predict. A cashless society will likely evolve first (meaning cash is outlawed, leaving only debit cards). The tangibility of money is conditioned out of the public. Public conditioning will be paramount in disassociating "price" and product.

    The wildcards are Trump, and the like, who want to protect wage-slavery (aka jobs). The Baby Boomer generation is in full support of "sanctifying their enslavement" by "working for their keep" and vehemently detest any sort of "handouts". The political dynamics may delay advancement until a generation has past.

    Many of the problems you've outlined can be mitigated by slowing the process rather than a sudden implementation. Evolution tends to solve impossible problems in ways we can't accurately imagine.
    Ernest likes this.

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    Quote Originally Posted by Neil View Post
    Demand for most things is really just intermediate; for example the demand for a car is really just demand for a reliable and convenient way to get to work, grocery store, etc.
    I think you've oversimplified and discounted the primary reason people buy a car: Fashion!

    Nobody is a utilitarian anymore. Too many $70k pickup trucks on the road that never haul anything... except their rump up to McDonald's.

    "Function" is secondary to "Form" with most people.

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    Quote Originally Posted by SophicDrippins View Post
    I think you've oversimplified and discounted the primary reason people buy a car: Fashion!

    Nobody is a utilitarian anymore. Too many $70k pickup trucks on the road that never haul anything... except their rump up to McDonald's.

    "Function" is secondary to "Form" with most people.
    Yeah you can say that; but the reason I did so is because it doesn't apply if a person hypothetically no longer had a car. What's the fashion of something that's absent?

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    Quote Originally Posted by Neil View Post
    Yeah you can say that; but the reason I did so is because it doesn't apply if a person hypothetically no longer had a car. What's the fashion of something that's absent?
    People who don't have cars still require a fashionable car. There aren't many people who would be happy just having anything that runs... anyway they would be in no position to account for any meaningful demand.

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