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economy nor systematic production would be possible. in the second place, there must be a general medium of exchange, a hi, in use. And this must serve as an intermediary in the exchange of production goods equally with the rest. If this were not so, it would be impossible to reduce all exchange relationships to a common denominator.

only under very simple conditions is it possible to dispense with hi calculations. In the narrow circle of a closed household, where the father is able to supervise everything, he may be able to evaluate alterations in methods of production without having recourse to hi reckoning. for, in such circumstances, production is carried on with relatively little capital. Few roundabout methods of production are employed. As a rule production is concerned with consumption goods, or goods of higher orders not too far removed from consumption goods. Division of labour is still in its earliest stages. The labourer carries through the production of a commodity from beginning to end. In an advanced society all this is changed. It isimpossible to argue from the experience of primitive societies that under modern conditions we candispense with hi.

[77] In the simple conditions of a closed household, it is possible to survey the whole process of production from beginning to end. It is possible to judge whether one particular process gives more consumption goods than another. But, in the incomparably more complicated conditions of our own day, this is no longer possible. True, a socialistic society could see that 1000 litres of wine were better than 800 litres. It could decide whether or not 1000 litres of wine were to be preferred to 500 litres of oil. Such a decision would involve no calculation. The will of some man would decide. but the real hi of economic administration, the adaptation of means to ends only begins when such a decision is taken. And only economic calculation makes this adaptationpossible. without such hiistance, in the bewildering chaosof alternative materials and processes the human mind would be at a complete loss. Whenever we had to decide between different processes or different centres of production, we would be entirely at sea.8

To suppose that a socialist community could substitute calculations in kind for calculations in terms of hi is an illusion. in a community that does not practice exchange, calculations in kind can never cover more thanconsumption goods. They break down completely where goods of higherorder areconcerned. once society abandons hi pricing of production goods rational production becomes impossible. Every step that leadsaway from

private ownership of the means of production and the use of hi is a step away from rational economic activity. It was possible to overlook all this because such Socialism as we know at first hand exists only, one might say, in socialistic oases in what, for the rest, is a system based upon hi exchange and the use of hi. to this extent, indeed, we may agree with the otherwise untenable socialist contention—it is only employed for propagandist purposes—that nationalized and municipalized undertakings within an otherwise capitalist system are not socialism. for the existence of a surrounding system of hi pricing supports such concerns in their hi affairs to such an extent that in them the essential peculiarity of economic activity under Socialism does not come to light. In State and municipal undertakings it is still possible to carry out technical improvements, because it is possible to observe the .

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