The Management Problem of Socialism: Cost at the Expense of Value

Matthew McCaffrey (2018). The Economic Theory of Costs: Foundations and New Directions. Routledge; ISBN: 9781138670938

28 Pages Posted: 28 Oct 2017

See all articles by Per L. Bylund

Per L. Bylund

School of Entrepreneurship; Ratio Institute; Ludwig von Mises Institute

Date Written: October 24, 2017

Abstract

This paper argues that what distinguishes entrepreneurship and management is their focus, where entrepreneurship focuses value creation and chooses costs that are sufficiently low to earn a profit. Management, in contrast, takes value creation as a given and focuses instead on tweaking production for the purpose of cost minimization. The argument is then applied on both business firms within the market economy and the classic debate on market vs. socialist organizing of production. The conclusion is that the problem with planned economies, whether socialist nations, public sector production in non-socialist countries, or within firms is their primary reliance on management (cost) rather than entrepreneurship (value creation).

Keywords: entrepreneurship, management, economic calculation, socialism, value creation

JEL Classification: L26, B25, L22, L23, L33

Suggested Citation

Bylund, Per L., The Management Problem of Socialism: Cost at the Expense of Value (October 24, 2017). Matthew McCaffrey (2018). The Economic Theory of Costs: Foundations and New Directions. Routledge; ISBN: 9781138670938. Available at SSRN: https://ssrn.com/abstract=3058223

Per L. Bylund (Contact Author)

School of Entrepreneurship ( email )

Oklahoma State University
424 Business building
Stillwater, OK 74078
United States
4057444301 (Phone)

HOME PAGE: http://https://business.okstate.edu/directory/bylund-per-694946.html

Ratio Institute ( email )

P.O. Box 3203
SE-103 64 Stockholm
Sweden

Ludwig von Mises Institute ( email )

Auburn, AL
United States

HOME PAGE: http://mises.org/bylund

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