Private Property and Economic Calculation: A Reply to Andy Denis

Abstract

Andy Denis (2015) revisits and adds to the Socialist Calculation Debate, one of the twentieth century’s greatest debates in economic theory. Denis argues that Austrian economists draw unsupported conclusions from their argument in claiming that private rather than several property is necessary for economic calculation. We note in this article that Denis’ argument rests on two key points: first, that the legal owners of capital, or the capitalists, play a purely passive role in the resource allocation process, and second, that it is the managers who bear the entire burden of speculative decision making and economic calculation. We then proceed to criticize both points. Key to our argument is the fundamental insight of Austrian economics that the market is an open-ended process of discovery, coordination, and value creation, where resource ownership and allocation is impossible to sever from entrepreneurship due to the inherent uncertainty of the future. We argue that from the Austrian market process perspective, economic calculation indeed requires private property, and not simply several control, because entrepreneurship under competitive discovery must be subject to both the lure of profit and the risk of loss.

Keywords: economic calculation, socialism, entrepreneurship, private property, factor ownership

JEL Classification: B25, B53, P41