OSCAR LANGE AND THE IMPOSSIBILITY OF ECONOMIC CALCULATION

The general point of this paper is that current opinions regarding Lange's analysis of socialism are mistaken. Lange is seen as one of the most ardent defenders of socialism. In fact, he admitted to serious faults in this system. Some claim that he predicted efficiency problems with state bureaucracies. His remarks on bureaucracy actually pertained to ethics rather than efficiency. Lange's critics claim that his analysis was static, but he also examined dynamic issues and sought to synthesize Marxian and Neoclassical economics. Most of these errors derive from undue emphasis on the trial and error part of his 1936 paper. Lange's views on socialism were far more complex. The first part of this paper argues that Lange's competitive solution addressed some dynamic issues, but did not answer the calculation problem. The second part examines two less developed but highly relevant issues that Lange explored - social dividends and capital accumulation. The third part examines the sociological and political parts of Lange's analysis, including socialist bureaucracy. The last part argues that while Lange posed a more serious challenge to Mises and Hayek than has been recognized, his conclusions regarding the relative merits of capitalism and socialism are unfounded. While most scholars of the Interwar Debate on Socialism interpret Lange as having offered an answer to the problem of socialist economic calculation, evidence exists to the contrary. Lange's thinking on calculation was more complex and less settled than commonly recognized. His 1936 and 1937 articles actually admitted to the impossibility of socialist calculation, but also asserted the impossibility of capitalist calculation. Lange's thinking evolved further on this subject, due in part to Lerner's influence, but he never arrived at a definitive answer to Mises and Hayek.