In the Calculation Debate, the Marxists, Austrians, and Neoclassicals Differed on the Meaning of “Rivalry”

But the market socialists did not clearly discuss whether and to what extent rivalry would be permitted in their models, and indeed in places contradicted themselves on the issue. This crucial ambiguity has seriously hampered most efforts to understand and respond to their arguments. This study will try to alleviate this problem by sharply distinguishing between two fundamentally different but equally plausible interpretations of the market socialist position in the debate.

The first interpretation, the “mathematical solution,” views the market socialists as assuming away the problem of rivalry and proposing a nonrivalrous static price system in the hopes of simulating a competitive equilibrium. The second interpretation, views the market socialists as introducing genuinely rivalrous competition into their models without, however, being aware of the serious implications of this, particularly with respect to the question of what “common ownership of the means of production” means if rivalrous competition is permitted. Each of these alternative interpretations fails, in its own way, to appreciate the rivalrous basis of the market process.

Thus the Marxists condemned rivalry, the Austrians asserted its necessity, and the neoclassical market socialists either assumed it away or failed to recognize the consequences of its introduction into their models. The reinterpretation of the calculation debate that is offered in this study will attempt to locate the fundamental difference among these paradigms n their disparate views of rivalry and try in that way to explain what the controversy was essentially about.

—Don Lavoie, introduction to Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (Cambridge: Cambridge University Press, 1985), 25.

Models of Static Equilibrium Banish Rivalry and Employ a Centralized Walrasian Auctioneer Instead

The neoclassical paradigm, represented by the market socialists in the debate, has recognized and elaborated upon this latter guiding role of prices but has largely ignored their rivalrous underpinning. Models of static competitive equilibrium banish economic rivalry from the scene and employ the construct of a (centralized) Walrasian auctioneer to adjust the prices that the actual participants passively accept as “parametric.” Within this essentially static framework it seems quite plausible to imagine a central planning bureau fulfilling the auctioneer’s duties. But, as is being increasingly recognized today, this neoclassical price adjustment model is inadequate for dealing with actual market behavior, and many of the same criticisms that present-day Austrian economists are leveling against this model can be leveled with equal force against modern central planning theory.

—Don Lavoie, introduction to Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (Cambridge: Cambridge University Press, 1985), 24.