What happened to Oskar Lange?

Oskar Lange was a very famous economist who debated Ludwig von Mises and Friedrich von Hayek on the feasibility of socialist calculation.

In 1936 and 1937 he entered the debate with Friedrich Hayek about the feasibility of socialism. He presented “market socialism,” in which the government would own major industries and a central planning board (CPB) would set prices for those industries. The CPB would alter prices to reach equilibrium, raising them to get rid of shortages and lowering them to get rid of surpluses. Hayek pointed out that having government set prices to mimic competition, as Lange suggested, seemed inferior to having real competition. Whether in response to Hayek’s criticism or for other reasons, Lange modified his proposal, advocating that the government set prices only in industries with few firms.

That’s all well and good – so how does this story end?

In their memoir Two Lucky People Milton and Rose Friedman have this at page 55:

Oskar Lange

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19 Responses to What happened to Oskar Lange?

  1. Bruce of Newcastle

    An apparent successor to Oskar Lange is Axel Kicillof, who was a Professor of Marxist Economics. Since he was appointed economy minister in Argentina he has had the chance to try Lange’s theory. And the results are exactly as you might expect.

    It just doesn’t work. Every time central planning is tried it fails, over and over. But next time it might be different!

  2. entropy

    He presented “market socialism,” in which the government would own major industries and a central planning board (CPB) would set prices for those industries. The CPB would alter prices to reach equilibrium, raising them to get rid of shortages and lowering them to get rid of surpluses.

    His twin brother smuggled himself into Australia where he assumed an identity as a deputy prime minister that went by the name black Jack McEwan.

    He adopted many of his brother’s policies and set back agribusiness by decades. None of the statutory marketing arrangements he established ended well.

  3. Andrew

    Poor bastard – had he lived to 110 he could have been making a handy living as a successful Middling Labor Figure somewhere on the front bench right now. Shadow Industry? Finance? Shadow Treasurer? Maybe even aspiring to be Deputy Opp Leader if the SLF fell under a bus.

  4. Ant

    A “companion and communist watchdog”?

    To the Tea Party activists in the USA that’s called the IRS. They’ll even remember you in the morning.

  5. Token

    It just doesn’t work. Every time central planning is tried it fails, over and over. But next time it might be different!

    I was listening to Peter Robinson’s recent interview George Gilder on Uncommon Knowledge who discusses his theories on why planned statist economies which do not enable economic and political development get the same predictable results.

  6. blogstrop

    Our system is (de facto) a mix of market forces and socialism.
    The mix varies slightly depending on the complexion of the government, but whenever it gets too market oriented you’ll have a return to the winged monkey union/media campaign of 2007.

  7. Fisky

    The Left later claimed that there was no need for prices, because computers could compile all the necessary information. The only problem with this was that the Soviet Union was unable to produce its own computers. So the very instrument that was meant to make socialism feasible, could not actually be developed under socialism.

  8. Lange helped instigate the most fruitful debate in economics. Mises and Hayek had s much better understanding of the market as a process afterward

  9. blogstrop

    But next time it might be different!
    Chavez was the next time.

  10. Johno

    It just doesn’t work. Every time central planning is tried it fails, over and over. But next time it might be different!

    We tend to associate central planning with failed communist dictators, but it is alive and well in Australia. Australian governments spend around $240 billion per year delivering services such as health and education. This spending accounts for around 15 per cent of all spending in Australia.

    Delivering these services requires government to engage in central planning. It might not be the all round planning of the Soviet’s Five Year Plan, but it is still central planning.

    The really scary part is that no one is to prepared to call it what it is. They prefer to pretend that’s it is something else. I don’t know what they think it is, but it’s still central planning.

    Part of the reason no one acknowledges that it is central planning is that modern micro-economists don’t seem to have any interest in understanding the problems associated with central planning in a mixed economy. Contemporary microeconomic theory only provides a justification for government intervention (so called market failures), but has little to say about how governments should go about this task. Much of the expert opinion governments rely on to design their service delivery is largely ignorant of the problems with government service delivery. Little wonder governments struggle to reform their service delivery.

  11. rebel with cause

    Australian governments spend around $240 billion per year delivering services such as health and education.

    Yes imagine if we allowed markets for the really important things like health and education.

  12. Alfonso

    Sorry comrades, socialism permanently destroyed in 6 words….. ” no price discovery mechanism that works”…..and that’s all she wrote.

  13. Dalai Lama

    Not only do most western countries practice socialist central planning in health and education, but, even more importantly, we have full on, almost never questioned, monetary socialism with managed interest rates and government-mandated fiat currencies, which the ‘wise sages’ (better described as central planners) at the central banks can and do debase at will.
    The result is a world with an unimaginable mountain of debt which can never be paid back and an increasingly unstable economic system, where the next crisis is likely to make the GFC look like a picnic.
    The Wall has fallen, but the socialists have won.

  14. Johno

    Yes imagine if we allowed markets for the really important things like health and education.

    It’s bizarre. It’s claimed that health and education are too important to be left to markets to provide, but we insist on providing them through a means that is well known to be inferior to markets.

    Then people wonder why governments are so bad at providing these services.

    Just privatise them. We will all be better off. Better services. Lower taxes. If you were worried about the poor not having access to these services, I’m happy to be taxed if it was to help the genuinely poor.

  15. amortiser

    Just ask yourselves what would happen if the government took over the servicing of motor vehicles. How long would you be waiting to get your car back on the road?

    Ask yourselves what would happen if the government took control of the production and distribution of food. It would not be long before the population would be starving and the population being subject to severe rationing.

    In health and education we are already subject to rationing yet somehow the population has been conditioned to accept this as enlightened policy. It’s bizarre.

  16. Gab

    Ask yourselves what would happen if the government took control of the production and distribution of food. It would not be long before the population would be starving and the population being subject to severe rationing.

    There’s an excellent graphic that answers that question.

  17. Ed

    “He maintained that a socialist system could combine efficiency and freedom by playing at capitalism.”

    In some ways, quite prescient because that’s the China model.
    He was never going to get the Soviets to see it his way, though.

  18. I am the Walrus, koo koo k'choo

    When he traveled abroad, it was with another woman, widely suspected of playing a dual role as companion and communist watchdog

    Was she cute?

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