If Only One Owner Establishes Prices, Then They Lose Their Basic Feature as a Denominator for the Competition Process

Socialism is a system organized by one owner, where there are no entrepreneurs competing for the most valuable use of resources. Even if one owner establishes some numerical system, this in no way differs from a straight ranking of all the possible ways of producing things. These centrally administered “prices” do not change anything since one owner establishes them, one owner acts upon them, and one owner changes them ex post. From the very beginning he employs the managers (there is no market for corporate control) and decides what in the accounting books is registered as profits and losses. In contrast, market economy prices are the result of different actions of competing owners and this is their nature: as a common denominator for different property assessments. If only one owner establishes prices, then they lose their basic feature as a denominator for the competition process and become only the expression of one owner’s preferences (hence they cannot be used as an independent economic indicator). Using prices in a socialist system is equivalent to a straight ordinal ranking of the processes by a central planner.

—Mateusz Machaj, “The Nature of Socialism,” in Property, Freedom, and Society: Essays in Honor of Hans-Herman Hoppe, ed. Jörg Guido Hülsmann and Stephan Kinsella (Auburn, AL: Ludwig von Mises Institute, 2009), 344-345.

Although the Demand for Money Can Be Defined as a FLOW or as a STOCK, We Will Use the Stock or Cash Balances Definition

The demand for money can be defined either as the demand for monetary payments (flow), or as the demand for cash balances (stock). As far as the determination of the price level is concerned, both definitions lead to the same result. We will work with the second definition (money demand concerns cash balances) because it highlights the crucial fact that money renders its services not only at the moment when it is used in spending, but also during the entire period when it is being held or “hoarded.” Money is the most marketable commodity. Thus cash balances, even while they are not being spent, provide liquidity services to their owners.

Cash balances are demanded for the liquidity services they provide. They are demanded for their purchasing power. The only exception is the merely nominal demand for money by collectors. The latter are not interested in the purchasing power of the bank notes and coins they collect. They are only interested in the notes and coins per se—that is why we call them collectors. But true money users do not demand mere nominal cash balances, but real cash balances. They demand a certain purchasing power.

—Jörg Guido Hülsmann, “The Demand for Money and the Time-Structure of Production,” in Property, Freedom, and Society: Essays in Honor of Hans-Herman Hoppe, ed. Jörg Guido Hülsmann and Stephan Kinsella (Auburn, AL: Ludwig von Mises Institute, 2009), 311.