Reply to Leland B . Yeager on " Mises and Hayek on Calculation and Knowledge

I n this article on "Mises and Hayek on Calculation and Knowledge ," Leland Yeager argues against the view recently propounded by Murray Rothbard, Jeffrey Herbener, and myself that calculation and knowledge constitute separate and distinct problems of economic organization and that Ludwig von Mises attributed the impossibility of socialism exclusively to its inability to solve the former problem. In rebuttal, Yeager alleges that calculation, as this term is used by Salerno, Rothbard, and Herbener (henceforward, SRH) refers narrowly to a trivial arithmetic operation and that it is, therefore, preposterous and a violation of a putative principle of hermeneutics, i.e., "a heuristic principle of textual interpretation," to identify, as SRH do, calculation in this sense as the crux of Mises's critique of socialist central planning. Yeager seeks to buttress his hermeneutical case by arguing that if the knowledge problem is solved, i.e., if the central planners are miraculously endowed with knowledge of all previously discovered production functions currently used or potentially useful, in addition to exhaustive and minutely detailed information regarding the quantities, qualities, and locations of existing resources and the global set of consumer value scales (comprehensively defined to include leisure and time preferences as well as preferences for the various types of labor), then all that remains to be done to effect a rational or "Pareto optimal" allocation of resources is to address a relatively tractable problem in linear programming that can be *Joseph T.Salerno is associate professor of economics a t the Lubin School of Business a t Pace University. like to thank two anonymous referees for many thoughtful suggestions on stylistic and substantive matters that contributed significantly to improving this article.