 OK, let's begin the lecture. The lecture is on calculation and socialism. Socialism is a very important topic because in today's world, we have a group of people known as progressives whose goal is to impose a socialist state on many Western countries, but not to do it in the way that Marx wanted to do it, that it's through revolutionary means, but rather through an evolution of interventions that is government encroaching on the market in different areas. One thing socialists have learned is that if you don't have a market, you don't have any means, any host to exploit and to be a parasite on. So modern progressives are in favor of sort of keeping the market. But they want the market hemmed in by government regulations. They want interventions that transform the market in a way that brings about egalitarianism. So calculation is still important, even though we don't have revolutionary Marxists anymore. We now want to use revolution. The progressives, by the way, want to use sort of a mass democracy to transform the market economy and to implement several goals, including and especially egalitarianism. So the most important article, I think, written, economics article, written in the 20th century was the article by Ludwig von Mises, Economic Calculation in the Socialist Commonwealth. And that really kicked off the modern debate over socialism. And we'll talk about what socialism, what the debate was before Mises, what were the lines of debate. But importantly, the first article really just completely destroyed the intellectual foundations of socialism. Socialism really never recovered from this blow. All the arguments that they brought forth later on, Mises had already touched on. Now he expanded on this article in Human Action in 1949. This article was written in 1920. But the seeds of all of the later criticisms, by him and by others, were in this original article. Not only was it a complete refutation of the case for socialism, the economic case for socialism, but it was also a revolutionary breakthrough in price theory. Because in this article, Mises set out what the function of prices were. The function of prices were to be used as means of calculation by entrepreneurs. So it was tied up with entrepreneurship, which you've heard quite a bit this week. I also direct your attention to the epilogue of this article by a notable modern Austrian economist. I recommend that you read that. So there were two kinds of socialism before Mises wrote. Scientific versus the utopian socialism. And you could refer to a lot of the progressives today as utopian socialists. They all have schemes, different schemes in their minds, about how they would like society to look after the great transition through mass democracy. Utopian socialists back then were two famous French writers, Charles Fourier and Henri Saint-Simon. And then, I guess, a Scottish writer, Robert Owen. The scientific socialists, of course, Karl Marx and Friedrich Engels. And we'll explain where the term scientific comes from. OK, it isn't really descriptive of what their socialism is. Let's focus a little bit on the utopian socialists, because they explain why Marx took the tack that he did. So this is Charles Fourier. You can tell just by looking at him, he's up to no good. He's thinking. He came up with an idea called the Fallen Stair, which was based on a Greek military formation. Utopian socialists and probably the progressives today are have a mania for symmetry. They'd like everything to be just so. So his idea of a Fallen Stair was to have garden cities modeled after a grand hotel of 15 to 1600 residents. I mean, they numbered. I mean, they had the exact numbers. I mean, everything was quantified. Everything was set out very neatly. Each resident would be able to purchase accommodations according to his income or her income tastes and tastes. All residents would be stockholders in the city. They'd be collective production. And everyone would share meals in a communal kitchen. They didn't like private life. Privacy was a hoarding of your own time. I just read an article by Murray Rothbard that I had never seen before. I read it a few days ago. And he makes this point. It came out just after he died in 1996. It's called the egalitarianism and the elites. I recommend everyone read that. But that's why socialists don't want privacy. They don't want private cars. They love public transportation. Because being in private, having solitude, is hoarding time, keeping it from the rest of society. Dirty work would be shared. Now, here's a sketch of the Fallen Stair. This is exactly how it should look. I mean, how do they know this stuff? How do they know this is the optimal way that society should be arranged? Well, they all have what's called the gnosis, a secret intuition that no one else is privy to. Each socialist has this private source of knowledge. And he even had a little model of the Fallen Stair developed for himself. Now, that's what it actually looks like. There was one that was built in Mommeth County, New Jersey, which is the next county over for me. And so that's the reality of socialism. That's what it looks like. OK, now, Fourier had a lot of ideas. And it's important to go through them. He focused on France. He said that 19th century France was allegedly the fifth stage of advancement. And society had, previous to that, passed through confusion, savagery, patriarchism, and barbarity. He knew this. No one else did, but he did. After passing through two more stages, it would approach the upward slope of harmony, the final stage of utter bliss, which would last for 8,000 years, more or no less. Then, however, history would reverse itself, and everything would run back. So what were some of the other things? Very interesting ideas that Fourier had. These are the things that would occur in that 8,000 year stage of harmony. There'd be six new moons. We replaced the one in existence. A halo, showering gentle dew, would circle the North Pole. Seas would turn to Kool-Aid, or some kind of sweet juice that he would drink. All violent or repulsive beasts would disappear, and they'd become friendly to humans. You'd have an antiline. You could ride them. You'd have anti-chickens, which would fly into your mouth, roasted already. This is serious. You can look at this stuff. The human lifespan in the harmonic stage would stretch 144 years, and 5-6 of the time would be devoted to the unrestrained pursuit of sexual love. Free love is a part of almost every utopian scheme. OK, so if you're a socialist who really wants to change things, you're looking at these guys, and you're saying, they're nuts. They're embarrassing. And that's what Marx was doing. Now, the classical economists easily destroyed the utopian socialists. They said, well, this is a standard problem, first of all. We'll take out the garbage under socialism. That's how it's usually phrased. We know that in a market economy, the price system provides incentives for people to do the dirty, the unhealthy, and other types of work that people don't prefer. There's an invisible hand of supply and demand. But the socialist answer was, well, there would arise a new socialist man who would work really for the community, for the approbation of the community, and not for monetary profit. But unfortunately, even though the classical economists destroyed the utopian socialist vision economically, both groups, both the utopian socialists and the classical economists, believed that if we didn't have this incentive problem, that socialism, yes, it could be as productive as capitalism. They never really challenged that. They simply said that you can't get people to do these things that you want them to do, and therefore, socialism will be less productive. But if for some reason there was really a new socialist man, that new socialist man or woman would be able to operate in a way that would make socialism as productive as capitalism. But still in all, the classical economists won the day and won the debate. That's where Marx comes in. That's where his brilliant, polemical ploy comes in. He realizes all the harm that these crazy scribblings of the utopian socialist did to the socialist cause. So he divides his doctrine of scientific socialism to counter them. And basically what it said is that, look, we need not talk about what the socialist future is going to look like. Socialism is going to come about as inexorably as the laws of nature operate. In the same way that a body dropped in a vacuum will accelerate at a certain rate of speed, certain as the law of gravity is, socialism will come about. Just as capitalism had replaced feudalism, and feudalism had replaced classical slave societies. And therefore, if you try to describe what the socialist future looks like, you are unscientific. There is no reason to try to describe it, to explain it, and explain how it will work in particular, because we already know that it's going to come about. And just as capitalism exists and works in a certain way and feudalism did, socialism will also do the same. So really, if you look at Marx's writings, they were all critiques of capitalism. They really had nothing to do with explaining what socialism would be like. So as Mises pointed out, this was brilliant as a rhetorical device, because it shut everybody up. If you were a socialist, you wouldn't try to talk about what it would look like, because you would be tainted as unscientific. But Mises wouldn't be shut up. Mises, who was a social democrat? Not a revolutionary socialist, but one who believed in socialism coming about through democratic means when he was younger, became an economist in 1903 when he read Manger's, around Christmas time, he told us that he read Manger's Principles of Economics, and it made an economist of him. So by 1920, he had known and learned enough economics that he came up with what we call the impossibility thesis, and basically pointed out that in a developed industrial economy with complicated production processes, a lot of capital goods, a lot of advanced technology, it would be impossible without economic calculation using market prices to organize rationally a socialist regime. So socialism, Mises said, was impossible. He used that word a number of times in the original article. And the argument is simplicity itself. Basically, socialism abolished its private property. There was a book written called The Contestants of Socialism by a professor who was kind of an interventionist who worked at the University of Vienna. And Shafla, Shafla was his name. And he looked at all the socialist schemes up to that point. He wrote this book, I think, in 1873. And he saw that every single, one thing that they all had in common was a hatred and a wish to abolish private property. So they hated private property, and they all wanted to abolish private property. And that, of course, Mises starts with that premise, that socialism will abolish private property in the means of production. Not necessarily in consumer's goods. You can own your own clothes, maybe even own your own automobile, and so on. But everything else, everything that's used to produce these things would be owned collectively by the state. All right, so now, if you have the state as a sole owner and decision maker regarding the material factors of production, they can no longer be exchanged. There can't be any, there's one person, or one group of people who have the same goal. So therefore, there can be no exchange. If there's no exchange, there can be no market prices. You've learned that much up to this point that you need exchange to have market prices. Under socialism, therefore, the state would not have prices to be able to calculate the costs of the things that it was producing. So we'd never know what anything costs to produce. So without knowing costs, even if you knew the prices, even if you sold the consumer goods, which Mises allowed, he said, yes, you could be paid certain vouchers to buy consumer's goods that could operate like money. But there would be nothing to compare these prices of consumer's goods, too, to decide if you're wasting resources or if you're producing things that consumers urgently demand. So without calculation of profit and loss, socialist planners cannot know the most valuable uses of scarce resources. And therefore, a socialist economy is impossible. So as Mises pointed out, it's like a socialist planner is like a man in the middle of a desert with no compass. He may know the goal that he wants to get to, but he doesn't know what direction to go in. He doesn't know what to do, literally. So the essence of socialism is not that there are bad people that control the means of production. They could be angels, or they could be devils. The fact is that one person or one group controls them, and therefore, there can be no exchange. So Mises wrote, the essential mark of socialism is that one will alone acts. It is immaterial whose will it is. Could be bad people, good people, indifferent people. Could be very smart people or dumb people. The main thing is that the employment of all factors of production is directed by one agency only. One will alone chooses, decides, directs, acts, gives, orders. The distinctive mark of socialism is the oneness and indivisibility of the will directing all production activities within the whole social system. In other words, there is no intellectual division of labor. There are no different minds interacting in marketplaces. One will cannot generate prices. One mind cannot generate a system of prices. It's impossible. A system of meaningful prices. You can come up with prices. You can put prices on things. They wouldn't mean anything. They wouldn't give you an idea of how scarce different things were and how they should be economized in Manger's terms. So what are the preconditions of economic calculation according to Mises? First of all, there has to be private property in all stages of production. All goods must be privately owned, including all capital goods, all original factors of production, meaning all kinds of natural resources and, of course, one's own labor. Secondly, that's not enough. You have to have the freedom to exchange all of these different kinds of goods on markets because that is what generates prices, which, in turn, allows you to calculate costs. And there must be a sound money, a money whose value you can depend on into the future. It doesn't have to be stable, as some people say. We don't have to have a stable price level, but the money has to be useful in the sense that it can be used for economic calculation as was the gold standard in the 19th century. And Mises put it that the political influence should not overwhelm the market forces that control the supply of money. So socialism abolishes all of these prerequisites and therefore nullifies economic calculation and therefore nullifies the rational use of scarce resources, which means that you cannot have a division of labor and specialization and therefore you cannot have society. Outside of a predatory groups of people roaming the countryside, killing animals, living off vegetation that's growing there. Okay, so let's look at the problem of socialism in the following way. Let's say that there's a socialist plan that decides or is deciding upon producing a batch of cars or producing, let's say maybe 20,000 cars or maybe in lieu of that, two million bicycles. Well, there's no problem with scientific knowledge under socialism or there need not be a problem whatsoever. Mises assumes for argument's sake that all the engineers and scientists who know how to produce cars are immediately accessible to the planners. So they know what we call in economics a production function, exactly the recipes, the different recipes, because cars can be produced in many different ways, the different recipes by which a car can be produced. Needs certain tons of steel, certain hours of machine time, the number of hours of unskilled labor, engineering labor, factory space, so on and so forth. You combine all of these, you transfer those, you transform those elements of your environment into a final car, and here is a BMW M500i, it's a beautiful car, but there's a problem. How can we calculate the cost of producing this car into socialism to determine whether or not the cost exceeds the value, okay, in which case it's a pure waste of resources, or the value exceeds the cost of the car, in which case you're using resources that could have been used elsewhere in a lower valued use, and you're using them and combining them in a way that gives you a higher valued use, okay, that benefits consumers. So in the marketing economy, you know how all this would be done. At every moment, right now, as I speak, every single capital good, natural resource, every unit has a price, okay, and it continues to have price, and they're changing. So that means anything that is thinkable, any product that you can think to produce, can be, the cost can be calculated. So let's assume that the average cost of producing the car is $50,000, if the entrepreneur expects that the price on the market, let's say in three years, when the car comes to the dealer's floor, will be $60,000, well then he'll produce it, and he has benefited society by doing so. He has taken resources that would have produced things worth $50,000, he was bidding against other entrepreneurs, right, this is the intellectual division of labor, who are all thinking about producing different other things, and he bid against them, he outbid them for those resources, and then he combined them into a package that was worth $60,000. So resources were used in a more highly valued use than they would have been used had he not intervened in the market. On the other hand, if he expects a price to be $45,000, well then it would be a waste of resources and he would not do it. Now, if he went through with it, because he expected the car to sell for $60,000, but yet it only sold for $45,000, he would have made a mistake, and we're not saying Mises never said that entrepreneurs don't make mistakes. The point is they realize that they've made the mistake when they see the losses, which the central planner would not know, and they then rearrange the resources. And if they don't do so, if they persist in thinking that the car is gonna be valued more than the resources, well then they'll go out of business and we have a selective process that selects out the bad entrepreneurs. Also, calculation allows the firm to determine what technology is least costly. A titanium bumper on a car is technically is probably the best bumper. I mean, I don't know how light titanium is, I don't think it's too heavy, but we don't use that, okay? And we no longer use steel, we used to use steel because steel would reduce the cost of service repairs in case of an accident. But now with fiberglass and the way they can make fiberglass, fiberglass bumpers are used, even though it might increase the cost of repair, it reduces the weight and the cost of running the car so much, use of gasoline, that it's more valuable. So all of these different decisions can be made rationally because of calculation. Okay, now I had a friend, I grew up with a woman who moved to Montana, and I've told the story many times. And she actually married a cowboy, a real cowboy, kind of like you see in Yellowstone. They had cattle and there was actually a few oil wells on her ranch, it's a very big ranch. But one day she called me up and she said, we got a new house. I said, oh, you moved off the ranch? She said, no. She said, well, we had it built, we had it built and shipped in. So in Montana where there's like 11 people, labor is very scarce and therefore has a very high price because more highly valued uses elsewhere, being cowboys for example. So you don't, as I found out, you don't build a house on site, okay? It's actually cheaper to build a house in modular pieces and then use those huge trucks that you see, the wide load trucks and ship those pieces to where they will then be assembled by some labor, but not as much as you would need and not with the same skills as the ones that would build the house on site as they would do in the Northeast or the Southeast here. So she had hers built in Omaha and shipped 687 miles. Now, would a Soviet planner have thought of that without knowing prices? Of course not. Who would build the house 700 miles away from the place and then ship it and think that that's a less costly way to do it? Well, an entrepreneur who's interested in making profits would do that, okay? That's just an extreme but important example. So Mises didn't deny that some economies could be run without calculation. If you had a single person who had homogenous labor, his labor is every hour of labor that he puts out is the same as every other hour. And there were only a few resources on this island that he stranded on. Well, then he could actually run his own household economy. He could determine without prices what goods were more and what goods were less valuable. That is, he could just value them. He could set up a value scale and let's say he had 12 hours of labor to work before he becomes exhausted. He would allocate three hours to each one of these types of goods, the fish, the mushrooms, and so on. But now let's say he had made a discovery that there are rabbits on the island and they require six hours to hunt and catch, okay? Well, he could actually know what the cost is without resorting to prices, okay? So Mises admitted this. So in this case, the third and fourth most valuable uses of those three hour blocks of labor time were the eight coconuts and one sac of berries, the least valuable things. So he would know that the cost of a rabbit is sacrificing eight coconuts and one sac of berries. But socialism can't advance beyond that level. It can't operate in a system where there are many capital goods that could be substitutable for one another over a vast range of different production processes, okay? For that, you need prices. So how did the Soviet Union get along for so long? Well, there's a few reasons, or a few reasons for why they last 75 years, which I'll get to. But how did they plan? Well, they had a central planning agency called Ghost Plan and it was gross output planning. That is, each industry was given a certain target to meet and then the commissar of that industry would give the firms under his or her direction the targets to meet in kind. That is, they would tell them how many nails to produce, how many yards of women's clothes to produce, how many tons of building nails and so on. So there were problems with this. It was difficult to specify qualities and varieties of the product. So they would generally use weight. Tons of nails or numbers, numbers of yards of cloth and so on. And so there were always problems with the production. Let me just give you some examples. There was a shortage of roofing nails because when the target was given, it was given in terms of tons of nails. So it was cheaper and easier to produce large nails rather than the small roofing nails. So even though many homes and commercial buildings were built in the Soviet Union, many of them didn't have roofs or roofs and therefore they stood unfinished because there weren't enough of these small nails. Other examples, there was a famine in the Soviet Union in the 1980s, but there were tractors that were rusting in fields of unharvested grain. So you had the grain, you had the tractors, but you didn't have the workers to produce them and you didn't have the gasoline because the workers were busy in factories producing steel, which would be turned into tractors, which would then sit in the fields and rust. Okay, so it was a totally irrational system. Also women were constantly complaining that there weren't enough petite sizes. Okay, so because again, if you're gonna make clothing, it's easier, you can meet your target more easily if you make large-sized clothing rather than multiples of smaller-sized clothing. Khrushchev, the Soviet Premier in the 1950s, once criticized in a polyporeal meeting, criticized the chandelier makers and the Westerners were scratching their heads, why is he doing that? Well, it turns out that they were making the chandeliers because it was again, gross output planning that were told they had to make certain amount of tons of chandeliers. They made them extremely heavy and so they were pulling down the ceilings of the Doshes and killing the comrades. And then there was an incident where Khrushchev once banged his shoe on the table in a UN meeting and supposedly said, we will bury you to the West but meaning will bury you economically. So when Soviet economists and Western economists met, the Soviet economists said, yes, we'll bury you but we're not gonna bury Hong Kong. We're gonna leave Hong Kong alone so we can see the prices and that's the key. I mean, how did socialism last for 75 years? They utilized prices on the world market. Mises said that there was no really true socialist regime ever in existence except for an exception that I'll talk about in a moment. Because socialism in a capitalist world, socialist countries are like the post office. It's extremely inefficient, it's annoying but they kind of get the job done if very badly and inefficiently because they can use prices that are generated on the world market just as the post office can use prices and technology that have been generated produced by the capitalist firms around them. And also the Soviet Union, you could think of it as one big firm that engaged in international trade. It sold gold, electricity, oil, diamonds on world markets so there were some prices there that it could use to calculate. There was also a system of bribes whereby firms that had surplus wood and needed some sheet metal would trade so there were trades, it was called blot and so there was sort of crude pricing there. Also the Soviet planners kind of turned the blind eye to black markets in things like Beatles records and American denim wear and so on. So there were a lot of illegal black market prices, gray market prices, prices in terms of bribery and so on. And so that's why it lasted for 75 years. It wasn't a true socialist economy. The only period in which there was true socialism where prices were not used, deliberately not used was the period of war communism which lasted from about 1917 to 1921. Things became so bad that the whole economy collapsed. People burned or were living in houses but they didn't have any heat and so they were burning their furniture to keep warm and when they burned all that up they then burned the house to keep warm and then they all migrated to the countryside and roamed around and lived off the land. I mean, that's what socialism would lead to. At that level where you have no prices you can use simple values to determine oh I like that rabbit better than, I'll go after that rabbit rather than that deer or something like that, okay? So what is it about, if we go a little deeper into it, about capitalism? Oh there's a great cartoon. So that's the plant manager telling the commas that I've met my gross output target, okay? And so it's a 50 ton nail that he's produced. And it was a system by the way of mutual lying because the Soviet planner would know, well let's put it this way, if you didn't make your target you got a vacation in the gulag, okay? You're shipped off. But if you exceeded your target, yes you did get bonuses and you may have gotten a better apartment but the next year they knew that you were lying so they would raise the target. So the manager would always lie about what the target was. He'd minimize it whereas the planner would know that he was lying and would give him an amount that would exceed the target. Hopefully not exceeding what he actually could make, okay? So to get back to the, what it is about the market economy that allows this wonder of providing for a very complicated technology, or using a very complicated technology to provide for hundreds of millions of people. Mises called it the social appraisement process and it's driven by entrepreneurs and it determines the prices of all consumers goods and capital goods and other resources, okay? And it looks like this. So if you look at the purple of the entrepreneurs, okay? They look ahead, okay? They look ahead at what the prices will be and what they believe or expect prices to be in the future, okay? Based on their expectations of future prices, they then bid against one another for all the available resources and in bidding against one another that establishes the prices of the factors of production which in turn allows them to calculate the costs to compare against those expected prices. All of us take part in this social appraisement process. That's why it's truly social. Each, no one of us comes up with the price system, okay? But yet all of us interacting in the markets in this intellectual division of labor, consumers, producers, laborers, entrepreneurs, all of us interacting together causes a price structure to arise that anyone can use, okay? So this is what we might call a positive externality, okay? So mainstream economists might say, well, we should be paying one another because we're getting this for free. Yeah, this is the fruits of a civilized society and economy, okay? That there is a price structure. It's always in existence. Every day when we wake up and go to work, it restarts again, okay? And it depends on the subjective evaluations and expectations of all of us, okay? So we get the current structure of resource prices. That's what you can't get in a socialist economy. So we call that the intellectual division of labor. Everyone is involved in generating the price structure. The consumers, capitalists, entrepreneurs, laborers, okay? Through all the choices they make based on their values. And in that sense, prices are a genuine social phenomenon. Everyone contributes a little bit to the formation of the price structure, okay? But it exists beyond, it transcends the individual human mind, okay? So it's truly, I guess people think that Hayek called it a miracle, but he actually called it a marvel. It's truly a marvel, the price system. And prices allow entrepreneurs to calculate the costs of any conceivable good, okay? That's technologically feasible to produce. All right, so let me just talk a little bit about some of the marked responses to Mises' argument. So in the 20s, there were some German socialists who responded to Mises. And one of the responses was that, well, we don't need prices, okay? We can calculate in terms of natural units as Otto Neurop, who was a fanatical Marxist, claimed, okay? We calculate costs by adding up resources in their natural units. Tons of steel, kilowatts of electricity, gallons of paint, apples and oranges. Of course, we know that that's not true. I mean, so Mises had already addressed this and said there's no way that you can add these heterogeneous units, right? I mean, it's the law of arithmetic that you can only add like units. And so that was one. The second was, well, let's calculate with labor hours since labor produces everything. Let's calculate with labor hours. But labor is not homogeneous, right? Different people have different skills and those skills cannot be added together. So for example, Neurop's difference is the quality of someone who is a McDonald's cashier, how that person differs from someone who's a software engineer or a brain surgeon, okay? Even in the same profession, you have the hours are not homogeneous, right? LeBron James, labor as a basketball player is much superior to the 12th guy, gawky guy, sitting at the end of the bench who doesn't play at all in the game, okay? So and also labor hours, just adding up labor hours, it takes to produce a good, leaves out an account that there's also capital goods and natural resources involved. The more capital goods that a worker's working with, the more productive that work will be. So for the same amount of hours, that work will be able to produce more because he or she has more capital goods. Or we can assume a stationary economy. That was another response to Mises. Let's just tell the managers, keep the same managers that we had yesterday, which was the last day of capitalism, and tell them that tomorrow on the first day of socialism, you'll come in and you do the same thing, okay? Well, that works if nothing changes and it might work for a few months. But the whole point of the market economy is to allow entrepreneurs to continually adjust to changes in people's tastes, technology, the depletion of resources or the discovery of new resources. So the economy is entrepreneurial, okay? It's not managerial, okay? The managers take their orders from the entrepreneurs. So you can't assume a stationary economy because of a changing world. You can't tell them socialist managers to do the same thing. I have a few more minutes, so I'll talk about some more sophisticated responses. It came from the English-speaking economists in the 1930s who were trained as neoclassical economists. And there's a couple of these and I'll go through just a few. So there was a mathematical solution. Basically, the mathematical solution said that, well, you know what? We know because of equilibrium economics that we can devise a system of supply and demand curves for all the goods in the economy. And we can run this simultaneous system of supply and demand equations and we can get answers as to how much, what's the optimum quantity of each good produced and what is the optimum price, okay? And so that's no problem, all right? The second response, more sophisticated response, was market socialism. The central planning board will set the prices of the factors of production and it will give two orders to the managers. One, minimize, use those prices that we're giving you, whether they're right or wrong, just use them. Minimize your costs based on those prices and then set your quantity at a point where the last unit that you produce has a marginal cost just equal to the price that we gave you, okay? And then, if there's a surplus, that is, if we set the prices too high, we'll lower the prices and if there's a shortage, we've set the prices too low and there's a greater demand than supply of steel or coal or something, we'll raise the prices and eventually we'll have an equilibrium price, we'll find the correct prices through trial and error methods, okay? So, let me jump over. There was a response by Hayek and Robbins which focused on there's not enough knowledge to figure out all the data that you need to put into these equations and even if you could, it would take a long time and even if you did that, you didn't have the computers in the 1930s to get a timely solution to the mathematical solution. And also, trying to set prices, how frequently are you going to do it? The market sets prices through trial and error from moment to moment prices change, right? But under market socialism, that couldn't be the case. They do it every month, every three months, in which case there'd be a lot of waste going on because the managers would be using the wrong prices. Mises' point was that this is all nonsense. Market socialism is children playing at the market. There is no bond market, there is no stock market, there is no creation and destruction of firms. That's the way resources are moved to their highest value uses in a real economy. You don't just have 10 firms with 10 managers who you give orders to, okay? You have owners that dissolve firms and create new firms. And then the mathematical solution, Mises said, let's just seek, simply assumes that everybody does the same thing round after round. In the real world, things are constantly changing and people are making mistakes. For example, and I'll end with this, today we have too many railroads and not enough trucks and not enough cargo planes to move goods across the country. Why? Because years ago, railroads were overbuilt. But that doesn't mean that you throw them away and start from scratch, okay? Profits and losses tell you how to use the capital goods that you built that may not be the optimum. And they're never an optimum, okay? Right now we have a lot of goods that should never have been built, a lot of factories that shouldn't have been built, but we make the best use of them. And how do we know how to use them? Not through a system of equations because there are no profits and losses in those equations, okay? But through actual profits and losses. So I'll stop here. Thank you.