Calculation in kind or calculation in-natura is a way of valuating resources and a system of accounting that uses disaggregated physical magnitudes as opposed to a common unit of calculation. As the basis for a

socialist economy Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that m ...

, it was proposed to replace

money Money is any item or verifiable record that is generally accepted as payment for goods and services and repayment of debts, such as taxes, in a particular country or socio-economic context. The primary functions which distinguish money are: m ...

and financial calculation. In an in-kind economy, products are produced for their

use value Use value () or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, or which serves a usef ...

s (their utility) and accounted in physical terms. By contrast, in money-based economies,

commodities In economics, a commodity is an economic good, usually a resource, that specifically has full or substantial fungibility: that is, the market treats instances of the good as equivalent or nearly so with no regard to who produced them. Th ...

are produced for their exchange value and accounted in monetary terms. Calculation in kind would quantify the utility of an object ''directly'' without recourse to a general unit of calculation. This differs from other proposed methods of socialist calculation, such as Taylor-Lange accounting prices, and the use of labor time as a measure of cost. Calculation in kind was strongly advocated by the positivist philosopher and political economist Otto Neurath when employed by the

Bavarian Soviet Republic The Bavarian Soviet Republic (or Bavarian Council Republic), also known as the Munich Soviet Republic (), was a short-lived unrecognised socialist state in Bavaria during the German revolution of 1918–1919. A group of communists and anarchist ...

. This led to a discussion in the early 1920s, in which much of the discussion about socialism centered on whether

economic planning Economic planning is a resource allocation mechanism based on a computational procedure for solving a constrained maximization problem with an iterative process for obtaining its solution. Planning is a mechanism for the allocation of resources ...

should be based on physical quantities or monetary accounting. Neurath was the most forceful advocate of ''physical planning'' (economic planning using calculation-in-kind) in contrast to market socialist neoclassical economists who advocated use of notional prices computed by solving simultaneous equations.

Austrian school The Austrian school is a Heterodox economics, heterodox Schools of economic thought, school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivat ...

critics of socialism, particularly Ludwig von Mises, based his critique of socialism on the calculation problem. The most prolific modern proponent of calculation in kind is the Scottish computer scientist

Paul Cockshott William Paul Cockshott (born 16 March 1952) is a Scottish academic in the fields of computer science and Marxist economics. He is a Reader at the University of Glasgow. Since 1993 he has authored multiple works in the tradition of scientif ...

who differs from Neurath in that he advocates the use of

labour voucher Labour vouchers (also known as labour cheques, labour notes, labour certificates and personal credit) are a device proposed to govern demand for goods in some models of socialism and to replace some of the tasks performed by currency under capi ...

s to set a scalar restraint on consumption. Proponents of in-kind calculation argue that the use of a common medium like money distorts information about the utility of an object. Socialists in favor of calculation in kind argued that, in a system of in-kind calculation, waste associated with the monetary system would be eliminated, and in particular objects would no longer be desired for functionally useless purposes like resale and

speculation In finance, speculation is the purchase of an asset (a commodity, good (economics), goods, or real estate) with the hope that it will become more valuable in a brief amount of time. It can also refer to short sales in which the speculator hope ...

– they would only be desired for their use-value.''The Alternative to Capitalism''. Retrieved July 05, 2010, from wspus.org "The disappearance of economic value would mean the end of economic calculation in the sense of calculation in units of value whether measured by money or directly in some unit of labour-time. It would mean that there was no longer any common unit of calculation for making decisions regarding the production of goods...Calculation in kind is an essential aspect of the production of goods in any society, including capitalism. A commodity is, as we saw, a good which by virtue of being produced for sale has acquired in addition to its physical use value a socially-determined exchange value. Correspondingly, the process of production under capitalism is both a process of production of exchange values and a process of production of use values, involving two different kinds of calculation. For the former, the unit of calculation is money, but for the latter there is no single unit but a whole series of different units for measuring the quantity and quality of specific goods used in the process of producing other specific goods (tonnes of steel, kilowatt-hours of electricity, person-hours of work and so on). The disappearance of economic or value calculation in socialism would by no means involve the disappearance of all rational calculation, since the calculations in kind connected with producing specific quantities of goods as physical use values would continue."

References

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External links

World Socialist Party (US) (the wspus.org quoted above)

Socialism Socialist calculation Economic planning Theory of value (economics) Schools of economic thought

See also

References

Further reading

External links