Oskar Lange's “Two Pages of Fiction” (His “Refutation” of Mises over Socialist Calculation) Is Founded on the Illiterate Expression “Given Data”

There is endless repetition of the claim that Professor Oskar Lange in 1936 refuted the contention advanced in 1921 by Ludwig von Mises that ‘economic calculation is impossible in a socialist society.’ The claim rests wholly on theoretical argument by Oskar Lange in little more than two pages, 59 to 61, in the most widely known reprint of his original essay, with Fred M. Taylor, On the Economic Theory of Socialism (ed. B. E. Lippincott, University of Minnesota Press, 1938). It will be timely to analyse this argument clause by clause. We shall here indent Lange’s successive assertions with the crucial terms in italics, and examine their validity and bearing one by one. . . .

Lange continues:

The economic problem is a problem of choice between alternatives. To solve the problem three data are needed; (1) a preference scale which guides the acts of choice; (2) knowledge of the ‘terms on which alternatives are offered’; and (3) knowledge of the amount of resources available. Those three data being given, the problem of choice is soluble. 

The illiterate expression ‘given data’ constantly recurs in Lange. It appears to have an irresistable attraction to mathematical economists because it doubly assures them that they know what they do not know. It seems to bewitch them into making assertions about the real world for which they have no empirical justification whatever. On the confusion supported by this pleonasm the whole of Lange’s ‘refutation’ of Mises’ argument (and most of the theory of resource allocation descending from it) is based. Note the following:

. . . it is obvious that a socialist economy may regard the data under 1 and 3 as given, at least in as great a degree as they are given in a market economy. 

—F. A. Hayek, “Two Pages of Fiction: The Impossibility of Socialist Calculation,” Economic Affairs 2, no. 3 (April 1982): 135-136.