Thus Hayek’s 1940 contribution to the “Socialist Calculation” debate debunked the then-fashionable notion that master planners could achieve the economic nirvana of running a centralized economy in which they obtain whatever distribution of income they choose while simultaneously making sound allocations of both labor and capital, just like in Soviet Russia.
Hayek exposed this fool’s mission by stressing how no given individual or group could obtain and organize the needed information about supply and demand conditions throughout the economy. The virtue of the price system was its use of a common unit of measurement—money—to allow various actors to compete for a given resource without having to lay bare why they need any particular good or service. The seller need only accept the highest bid, without nosing around in other people’s business. The interaction between buyers and sellers allows for constant incremental adjustments of both price and quantity. Old information gets updated in a quick and reliable way, thereby eluding the administrative gauntlet of the socialist state.
This essay, which y’all should read, was sparked by the attacks on Rep. Paul Ryan’s supposed intellectual influences F.A. Hayek and Ayn Rand.