Machan: Budget Crises and Economic Calculation

Tibor Machan gives them too much credit. Mises’ economic calculation argument, reiterated in the article, explains why socialism can’t work, but I don’t think it says what Machan wants it to about budgets. After all, a car thief can balance his household finances, despite making his living through coercion. A government could, in principle, spend only money actually collected (stolen) last year when enacting this year’s budget.

The real reason that government officials do not balance budgets is that they have no motivation to do so. The politician’s personal share of any government debt/future taxes is tiny relative to the political benefit he gains when spending tax money, otherwise he wouldn’t do it. That is the nature of the incentive structure of coercive government: the benefits are shared by few, while the pain is spread among many.

2 thoughts on “Machan: Budget Crises and Economic Calculation”

  1. “The real reason that government officials do not balance budgets is that they have no motivation to do so.”

    I think you are correct that the calculation argument alone doesn’t get you where he wants to go here, but Machan does touch on Public Choice Theory in the piece.

    I also think general conclusion from the calculation argument that socialism can’t work is a bit too strong. It depends what you mean by work. It’s massively less efficent than a market economy but that doesn’t quite mean everyone is going to die. But again, when you couple it with Public Choice the ultimate result might well be that everyone will die.

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