Economic Flaws in Computerized Socialism

27 Pages Posted: 16 Mar 2018

See all articles by Joseph Kane

Joseph Kane

R Street Institute; The Catholic University of America

Date Written: July 7, 2017


In the first half of the twentieth century, economists associated with the Austrian school argued information necessary to effective economic calculation requires the use of market prices and cannot be centralized in a way that would make central planning a viable alternative. It followed from this conclusion that socialism, in any meaningful sense, is impossible. But new technology leads some to question that claim. Voices from Lange in the 1970s to those more contemporary hold that if only technology could become advanced enough, central planning would work.

Given the large technological leaps of the past few decades, the socialist claim has never seemed more plausible. The rise of the Internet of things, ever-faster supercomputers, and gigabit Internet access provides a glimpse into the now radically connected world in which precise information about minute details of goods is transmitted around the world at near the speed of light. Some on the socialist side are now claiming that the very information that the Austrians told them had to be decentralized and conveyed by market prices can now be assimilated by computers. This paper analyzes whether current, or any conceivable, proposals that the radically connected modern age could solve the knowledge problem and make central planning a viable method of economic organization. It finds that claims that technology can solve the problems with central planning simply miss the point of the Austrian critique. Central planning, using the Internet or any other means, still cannot dispense with the competitive market process without which the discovery of the information necessary for economic calculation is impossible.

Keywords: Calculation debate, central planning, algorithms, artificial intelligence, Cybersyn

Suggested Citation

Kane, Joseph, Economic Flaws in Computerized Socialism (July 7, 2017). Available at SSRN: or

Joseph Kane (Contact Author)

R Street Institute ( email )

1050 17th Street Northwest
Washington, DC 20036
United States

The Catholic University of America ( email )

3600 John McCormack Rd., NE
Washington, DC 20064
United States

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