Socialism and the ‘knowledge problem’

In his 1920 paper “Economic Calculation in the Socialist Commonwealth,” the economist Ludwig von Mises dealt what should have been an intellectual death blow to socialism, showing, as he put it, that “rational economic activity is impossible in a socialist commonwealth.” Mises expanded on the argument in his Socialism, and F. A. Hayek took up what came to be known as the “knowledge problem.” Socialism, which purported to be scientific before it purported to be humanitarian (both claims have proved false), assumes that all relevant knowledge is essentially scientific in character and that economic problems may be solved in more …