Jonathan Newman – April 27, 2019
One of Ludwig von Mises’s most important contributions was to point out that economic calculation is impossible under socialism. Meeting consumer demands requires that factors of production are allocated to the right lines of production in the right quantities at the right time — and that they are combined in the right ways to produce what consumers want and need. Entrepreneurs make these decisions in a market economy, but they are dependent on the prices of factors of production to make their decisions. They must compare these prices to the anticipated prices of the consumer goods to be able to say yes or no to any production plan.
Socialism, however, means that private ownership of the factors of production is abolished, which means there can be no exchange of factors of production. No exchange means no prices, which are vital bits of information for entrepreneurs in a market economy. Whoever is in charge of making production decisions in a socialist regime will be “groping about in the dark” without the use of market prices for the factors of production.
This is why socialist experiments always end in disaster. The death toll for socialist experiments since the USSR is easily beyond 100 million. Resources are wasted instead of used to make food, medicine, shelter, energy, clothing, and other necessities.
Interestingly, another key tenet of socialism, besides abolishing the ownership of the factors of production, is abolishing the family. This is strange because the traditional nuclear family seems like it could be used in producing convincing socialist rhetoric: it is a good example of social bonds without private property, prices, and “capitalist exploitation.”
Yet, Marx, Engels, and many of their modern followers are anti-family. Marx and Engels write in The Communist Manifesto:
Abolition of the family! […] On what foundation is the present family, the bourgeois family, based? On capital, on private gain. In its completely developed form, this family exists only among the bourgeoisie. But this state of things finds its complement in the practical absence of the family among the proletarians, and in public prostitution.
The bourgeois family will vanish as a matter of course when its complement vanishes, and both will vanish with the vanishing of capital.
Do you charge us with wanting to stop the exploitation of children by their parents? To this crime we plead guilty.
Marx and Engels make a distinction between bourgeois and proletariat families, but “both will vanish” once communism is realized, apparently because — according to Marx — bourgeois families are predicated on exploitation. Men exploit their wives and parents exploit their children, all for “private gain.”
Engels writes in Principles of Communism:
What will be the influence of communist society on the family?
It will transform the relations between the sexes into a purely private matter which concerns only the persons involved and into which society has no occasion to intervene. It can do this since it does away with private property and educates children on a communal basis, and in this way removes the two bases of traditional marriage – the dependence rooted in private property, of the women on the man, and of the children on the parents.
The communist society includes the public education of children and a breakdown of social norms on monogamy, family responsibilities, and dependence on any individual. According to ReviseSociology.com:
Marxists argue that the nuclear family performs ideological functions for Capitalism – the family acts as a unit of consumption and teaches passive acceptance of hierarchy. It is also the institution through which the wealthy pass down their private property to their children, thus reproducing class inequality.
Modern Marxists argue that families are just propaganda channels for capitalism. Families instill acceptance of hierarchy and give the bourgeoisie a way to “reproduce class inequality” through inheritances. To this end, Engels approvingly quotes Marx in The Origin of the Family, Private Property and the State:
The modern family contains in germ not only slavery (servitus), but also serfdom, since from the beginning it is related to agricultural services. It contains in miniature all the contradictions which later extend throughout society and its state.
For Marx, the family represents a microcosm of capitalism. But why didn’t he identify it as a microcosm of socialism to argue that if socialism is feasible at the family level, then it could be feasible at a larger scale?
After all, family members do not use prices to convey information to each other about the demands for food, yard work, what vacation to go on, vacuuming, board games, transportation to events, or other things family members do for and with each other. While there are some items and rooms in the house that are used more often by one family member than the others, we do not really have justiciable “private property.” I am not accumulating IOUs from my daughter every time I provide food for her.
Exceptions to this norm or ideal are just that: exceptions. Sometimes parents pay their children to do certain chores, but we can hardly call that payment a market price. It’s more of an educational exercise to teach children responsibility and the value of money earned. No one could argue that these “prices” are the foundation for the family’s economy, preventing them from falling into calculational chaos.
I can’t say why Marxists so dislike the family except to say that it’s only fitting that the people so wrong about human nature would be wrong about the institution of the family. But it’s worth exploring how families can thrive without prices when macroeconomies crumble without them.
Knowledge
One answer is that families are kind of like Crusoe on his island. Crusoe can allocate factors of production toward his wants and needs without prices because they are his wants and needs. He knows exactly how much time to work toward the production of coconuts and berries because he knows he prefers the marginal unit of one food to the other.
Family members do not share a mind, but they are intimately aware of what the other members want and need, more so than anybody outside the family. This is sometimes communicated directly, like when deciding on what to cook for dinner, but it is also something learned over time. After spending so much time with somebody, you become like an expert entrepreneur who is able to anticipate the other’s preferences.
This doesn’t scale up to the national level, obviously. I do not have intimate knowledge of what some random individual in Wisconsin will want to eat seven months from now, but this is the sort of anticipation entrepreneurs make on a daily basis, many times unknowingly by producing capital goods in intermediate stages of production years before the random Wisconsinite even realizes he is hungry. As said before, they can only make these production decisions with the help of market prices for the factors of production.
Care
Another reason families don’t fall apart without prices is that family members actually deeply care about each others’ wellbeing, and sometimes they do know what’s best for you even when you disagree. It’s not enough to say that a mother knows what her child wants and needs, she must also want the best for her child. Thus, families overcome (or are pretty good at dealing with) a knowledge problem and an incentive problem.
While I don’t want the random Wisconsinite to go hungry seven months from now, it’s not a high priority for me. I don’t have anything against that guy in Wisconsin, it’s just that I can only care about so many causes, and my family is more important to me, due to quite a few factors including proximity, my religious beliefs, my own subjective preferences (frankly), and the expectations of friends and other family.
Market economies overcome this with prices. By offering to pay for various goods and services, I offer an incentive to others to provide for me. This works vice versa in a division of labor, and it works beautifully. The most famous passage in the Wealth of Nations by Adam Smith describes this phenomenon:
“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
The dictators, central planning boards, and workers’ collectives of socialism cannot care for each individual like we care for our family members, and they cannot care for each individual’s specific wants and needs like entrepreneurs in a market economy can, even if it is a profit motive. I’d rather a greedy capitalist sell me the food I want than a central planning board arrange for my starvation in the name of free food.
Outside Information
Finally, families are little price-free islands in a sea of prices. We can easily refer to market prices to help us make decisions in the home as a family. While there are no prices within the household, there are prices outside the household that help us economize resources. This is how socialist countries can last as long as they do. They rely on the prices of various goods and services in other countries. Even firms need external markets for factors to be able to properly reckon profits and losses and make investment decisions.
In this sense, Marxists are right to refer to families as units of consumption. My wife and daughter’s happiness is my happiness. We have the same budget, so we know our individual spending choices impact each other. Large purchases are only made with consensus. Therefore, the unity of the family is a positive, not a negative like the Marxists suggest.
This cannot work at the national level, as we have seen. Or, it does work, but only for a short while and at a severe disadvantage to having market prices both outside and inside the country. Nations are not “units of consumption” like individuals or families with a single budget and closely aligned preferences over a commonly-owned set of resources.
Conclusion
These ideas on how families survive the economic calculation problem imply that strong, thriving families are ones in which the members know a lot about each other, care a lot about each other, and are unified in their decision-making. Knowledge about each other can only come by many shared experiences and honest communication. Care for each other can be rooted in shared religious beliefs and the duties and affections that come from the shared faith. Unity naturally flows once these are established.
This article was originally published at Mises.org.
Image source: Getty
