Many early socialists denied that their utopia even needed economic calculation: The habits and morals of mankind would simply change, they declared, and each of us would come to feel in our very souls what we should do, in whatever economic circumstances might arise. That was heady stuff, but not at all practical. As a result, some of the more hard‐​nosed socialist theorists turned to calculation. But it should be remembered that the theory of economic calculation always far outstripped the practice.

Even in the Soviet Union, and even despite talented economists like Leonid Kantorovich, mathematical planning was rarely more than window dressing on what amounted to an elaborate, politically driven wish list.

Planners bickered, formed factions, falsified, cheated, stole, and – when all else failed – they allegedly lifted consumer prices directly from the Sears Catalog. But they didn’t calculate, whether in money prices, or shadow prices, or hours of labor, or anything else. In some ways this is a stronger indictment of the Soviet system than even the existence of the gulag: It shows the Soviets weren’t eating their own dog food.

One may wonder, then, how much of the socialist calculation debate amounts to the good guys being completely gulled by the other side. When real socialists do not calculate, how can we call it “socialist” calculation?

As I’ve stressed before, though, we study socialist calculation because it is a kind of outline or a shadow to the market economy. Socialist calculation attempted to obtain consciously all of those things that markets tend toward through unplanned human action, through the so‐​called invisible hand. Examining socialist calculation makes the actions of the invisible hand more visible.

One such action is finding the value of capital goods. Ludwig von Mises was the first to stress the peculiar difficulty of this task under socialism.

Mises noted that consumption goods would be distributed in a planned society according to whatever criteria its leaders thought proper: presumably these criteria would be very egalitarian, perhaps with special consideration to individuals’ needs, although in practice a planned society could use whatever criteria its leaders wished.

Yet these distributions, whatever they were, would have great difficulty taking into account consumers’ varied and ever‐​changing preferences: We can’t give everyone a set of dentures and expect them all to be made equally happy.

Exchange would probably arise, regulated or not, with money or not, and it would likely be beneficial even in a planned society – but only for consumption goods. Capital goods, remember, would never be allowed to go to market. They’re owned collectively.

But how does one determine which capital goods go to what use? Whenever possible, we will want them to produce the consumer goods that have the highest consumption values, of course. But which kinds of capital goods should be preferred, and how are they to be used, and when? And how do we know when to stop using them here and start using them there? When a raw material goes through several stages of production, with choices of different later end products and/​or intermediate processes, how do we know where to direct the intermediate goods – if not with price signals from the (sadly non‐​existent) capital goods markets?

Mises writes: