The inefficiency of socialism

It's absurd when advocates of enforcement - state redistribution and central planning - blame the market system for inefficiency. It's about fateful conceit, when it transfers its subjective efficiency criteria to all others. However, they do not realize that just Volunteering is a basic prerequisite for efficiency.


What is effective in the economy?

The economy is made up of people. Not costs and benefits - these are the result of people's evaluations. Therefore, we cannot objectively evaluate efficiency according to costs and revenues - we must first know what goals one wants to achieve and how he perceives costs and revenues.

What fulfills subjective needs is effective individuals behind him perceived in a given situation by the smallest subjectively perceived costs.

This is the reason why voluntary exchange can be assumed to be effective in the long run - that is, that through the exchange the subjective needs of those who exchange are met in a given situation.

The exchange as such is voluntary. If all participants in the shift did not expect that the shift would bring them "benefits", ie that the shift would not meet current needs (that the shift would not be effective), the shift would not take place. If that expectation is not met, the shift will not take place in the future.

This "sieve" of fulfilling or not fulfilling expectations, in other words competition, ensures that people exchange and inefficient shifts are excluded from the market (voluntary cooperation system).

Subjectivity of efficiency

Efficiency is thus a subjective factorwhich cannot be determined objectively. We cannot even judge it by the measure of later preferences - at a given time, under given circumstances, given preferences and information, the given choice was the most effective (most led to the satisfaction of needs at the lowest perceived cost).

The fact that "later" we gained new knowledge, information, skills, so that "later" we would have an option that would seem more effective to us is irrelevant. We did not decide "later", but at the moment, with a certain state of our knowledge and possibilities.

Later - when we have other knowledge, information and options - it is about a completely different situation. It's completely another choice, completely different criteria, completely different needs and preferences.

It is thus quite clear that in order to achieve an effectively functioning system, the world, it is necessary to let people make decisions, associate and exchange voluntarily.

The system of voluntary cooperation, association, exchange and decision-making is market system. The means that allow us to decide what shift we want to make with is voluntarily set price, which is the result of measuring the ratings of all parties participating in the shift.


Price is always a ratio. It doesn't matter if it's "5 crowns" or "three goats for two oxen". Both in the first and in the second case it is the ratio of the marginal evaluation of both parties.

The market price is thus the result of a subjective evaluation and is a means of finding the means to meet needs. Market (voluntarily established) price is thus a necessary means of efficiency.

However, not only the market price, but voluntary exchange as such is a necessary precondition for efficiency. Only if a person voluntarily decides what means, under what conditions he will use to fulfill what goals, can he fully express his subjective evaluation and is therefore most likely to achieve efficiency.

The voluntary exchange system is a market system. We do not have to be modest and we can continue - the market system as such, capitalism, is a necessary precondition for efficiency.


The moment you force people to work together, you don't know if you've achieved efficiency. You do not know whether the cooperation would have taken place without your coercion. Even if that happened, your coercion was counterproductive, or all the enforcement apparatus is then an unnecessary extra expense.

The moment you force people to work together, you can't achieve efficiency because you don't allow people to cooperate voluntarily. It doesn't just affect shifts now. Your decision to force someone to shift means that they could not make another shift that they would otherwise have done voluntarily.

In that moment there will be no pricewhich would arise in a voluntary market system. This price cannot be included by others in their evaluation, therefore nor can others achieve potentially effective results their actions and are forced to use other options - if they are allowed to.

Butterfly wing effect

Even one coercion - even one voluntary exchange that does not take place - can have a far-reaching effect on the whole economy. There is a "butterfly wing effect" - the absence of a single price can directly or indirectly affect the calculation (evaluation) of billions of other people who decide otherwise - they are forced to adopt other solutions that may be less effective in a subjective comparison than the origin of the price.

We can assume this with relatively great certainty. If the solution possible at the potential price was not more effective, it would not be chosen. One voluntary exchange, which does not take place now, may result in the emergence of an entire industry in, for example, a hundred years.

Economic socialism

In economics, "economic socialism" is a system of central planning.

The central planning system is enforcement systemwhen the central authority decides who will work with whom, therefore the central authority decides on the creation of prices, goals and means.

If v system Economic socialism is not a market, voluntary cooperation and prices arising from the voluntary subjective evaluation of individuals, it is clear that it is a system that is likely to be ineffective. If only one forced transaction brings such a high opportunity cost, how huge does the entire planned economy bring?

Even if the "planner" accidentally "hits" and ensures the cooperation of two people who would cooperate in a voluntary system, it is still a less effective solution. If they cooperated voluntarily in a voluntary system and had to be brought together in a planned economy, this means that it is already on another cooperation. It's not just the two sides anymore, but the parties three - two individuals and a planner. Is there extra load, despite the fact that the fact that they had to be forced to cooperate, indicates that there is such chaos in the whole economy - the absence of prices and markets - that the individuals in question did not even know that they could cooperate with each other.

Fatal conceit

It is absurd for proponents of enforcement - state redistribution and central planning - to blame the market system for inefficiency. It's about fateful conceit, when it transfers its subjective efficiency criteria to all others.

They think they know better than the people themselves what is good for them. However, if this were the case, they would succeed in competing with the business environment. Since this isn't usually the case, it's just that they don't like the decisions of the people they want to change by force. However, they do not realize that just Volunteering is a basic prerequisite for efficiency.


  1. Mr. Kubec,
    not only are you a traitor, but you are also appropriating the thoughts and work of others.

  2. Certain equality (within certain limits, which IMHO is justifiable) the market is trying to achieve - but it is not equality at all costs (I will be lazy, Franta will work and we will both have the same), it is a system that motivates people, to work where it is most needed (eg small supply and high demand => high market price => high interest). Those who take care of their effectiveness in this way will be duly rewarded…

  3. But socialism is fundamentally ineffective, so if equality is a goal, then that goal cannot be achieved in socialism, because goals can only be achieved if we can be effective. And even the planner lives in their planned farm…

  4. The problem is that the goal of socialism is not efficiency and wealth creation, but equality. So it doesn't make sense to blame him for inefficiency. It should be pointed out that even in socialism people cannot be equal, that in socialism there will be a group of rich and a group of poor.

Comments are off.