Years back, I was arguing philosophy with a friend of mine, and he asserted that the difference between us was that he would be willing to embrace socialism in a heartbeat if it could be shown that people would be better off under socialism, but that he didn’t believe I would. Uncharacteristic though it may be, I had no response to that; on the one hand, I surely don’t want to believe that I would gladly condemn the human race to immiseration before I would back down from my libertarian purism, but, on the other hand, I really cannot conceive of a reality in which I would endorse socialism.
This gave me quite a bit of trouble. As I’ve written before, if there’s a conflict between your ethical system and the survival of mankind, surely the former and not the latter is the problem. How was this to be reconciled with deontological libertarianism, though? Am I compelled to become a utilitarian?
Fortunately, it turned out that there was a solution — one that doesn’t even require the eradication of mankind, to boot! The key to the puzzle is to take a step back and evaluate our terms. What would it mean to discover that socialism really does lead to a better outcome for mankind? Importantly, it would mean that the laws of reality are meaningfully different from what they actually are — so different, in fact, that it becomes ludicrous to assume that a blithe comparison can be made between philosophy of this world and that of a hypothetical "socialism-friendly" world.
This is so because, to be successful, socialism first of all requires vastly more computational power and bandwidth than is available or will be available any time in the foreseeable future. The socialists of the 60s attempted to counter this by claiming that the coming computer revolution would finally enable the socialists to calculate properly, but, as history has quite abundantly shown, this was not even remotely true. In order for socialism to be viable, it would be necessary for the planners to compute all the various changes that take place in the desires of all the consumers in the world roughly in real-time, and then communicate that information to all the producers in exactly the right manner, at which point all the producers need to be engaged in such lines of production that they can adjust to fit the new data. This cannot work.
To make matters worse, the data itself isn’t even available; even if the bandwidth and processing power hurdles were conquered, there’s nothing for them to calculate! Preferences are revealed only through action. By the time the data would become available to our impossible genius planning board, it would already be too late — the decisions have already been made!
"Wait a minute, bee guy," I hear you saying, "if the data isn’t available, it isn’t available. That’s not a problem unique to socialism." You’re right, of course; entrepreneurs in a market economy don’t have access to that data either. The market economy has a few brilliant ways of working around this problem, however, that are not duplicable in a command economy. First off, all decision-making in a market economy is localized to the greatest possible extent. This means that, rather than distant planners in Washington attempting to predict what things people in Anchorage will want, those predictions are made by people in Anchorage. More importantly, though, they’re not made by a central planning board in Anchorage, but by absolutely everybody who thinks he has a clue and desires to act on it. This creates redundancy — idiots like Kshama Sawant claim that it’s "wasteful competition" to have a bunch of different kinds of cell phone available, but they don’t comprehend that this very diversity is what enables the market to determine which features consumers want. Looking backward, it’s altogether too easy to imagine a natural progression from feature phones to smartphones, but no such inevitability existed; Apple took a massive risk when it launched the iPhone. Apple also, of course, did tons of research and hedged itself in a variety of ways, but there’s no getting around the fact that the iPhone very well could have been a flop. It looks inevitable in retrospect only because we are unable to see the roads not taken.
So far, it sounds like I’m saying Sawant is right — capitalism does lead to a whole bunch of waste, since all those failed products have to go somewhere! Surely they do. You know where they go? Into the hands of consumers. This happens through the magic of the price system. Once a good already exists, assuming that the possessor derives no use value from it, it must be sold for some price. The higher the better, of course, but if nobody’s buying, the price will come down. Eventually it’ll be cheap enough that somebody will buy it. Surely this isn’t waste! Somebody who maybe couldn’t afford the latest-and-greatest phone — or who doesn’t care enough about phones to spend that much — gets a "failed" competitor for a steep discount.
Now, before you argue that a socialist economy could do the same thing, I’ll interrupt and point out that it surely couldn’t; this process depends entirely on market prices for its operation. Market prices cannot exist without private ownership (yes, I do realize that a socialist economy could have what appear to be relatively free market prices on actual finished consumer goods; there could be no market prices for capital goods, however — quite by definition — meaning that capital will always be allocated wastefully). A socialist economy, therefore, could never accomplish the remarkable feat of satisfying constantly shifting consumer preferences without massive overproduction.
None of this is a new insight, of course. Ludwig von Mises laid this all out comprehensively almost a hundred years ago, albeit without calling Kshama Sawant an idiot. Stop and think about it, though. Consider how fundamentally different reality would have to be for that atrocious mess to be a viable method of organizing society. We would have to be living in a world in which one’s preferences could be polled and known ahead of time by a planning board, and in which there are basically no production processes that can be made more efficient through lengthening them. That is a world wholly unlike ours, so those of us who are principled libertarians can sleep soundly, content in the knowledge that it simply makes no sense to discuss what we would do if socialism turned out to be awesome.
Also worth noting, of course, is that the planning board would somehow have to accommodate people’s preferences not to be planned for by a board. It is impossible to imagine how this would work. On the other hand, the free market can (and does!) handle people’s desires to be planned for just fine.