In the first case there is a market, there are market prices for all factors of production, and economic calculation is possible. In the second case all these things are absent. It is vain to comfort oneself with the hope that the organs of the collective economy will be “omnipresent” and “omniscient.” We do not deal in praxeology with the acts of the omnipresent and omniscient Deity, but with the actions of men endowed with a human mind only. Such a mind cannot plan without economic calculation.

A socialist system with a market and market prices is as self-contradictory as is the notion of a triangular square. The essential mark of socialism is that one will alone acts. It is immaterial whose will it is. The director may be an anointed king or a dictator, ruling by virtue of his charisma, he may be a Führer or a board of Führers appointed by the vote of the people. The main thing is that the employment of all factors of production is directed by one agency only. One will alone chooses, decides, directs, acts, gives orders. All the rest simply obey orders and instructions. Organization and a planned order are substituted for the “anarchy” of production.

When the socialists declare that “order” and “organization” are to be substituted for the “anarchy” of production, conscious action for the alleged planlessness of capitalism, true cooperation for competition, production for use for production for profit, what they have in mind is the substitution of the exclusive and monopolistic power of only one agency for the infinite multitude of the plans of individual consumers and those attending to the wishes of the con sumers, the entrepreneurs and capitalists. The essence of socialism is the entire elimination of the market and of catallactic competition. The socialist system is a system without a market or market prices for the factors of production, and without competition; it means the unrestricted centralization and unification of the conduct of all affairs in the hands of one authority.

In the market society there are money prices. Economic calculation is calculation in terms of money prices. The various quantities of goods and services enter into this calculation with the amount of money for which they are bought and sold on the market or for which they could prospectively be bought and sold. It is a fictitious assumption that an isolated self-sufficient indi vidual or the general manager of a socialist system could calculate. There is no way which could lead one from the money computation of a market economy to any kind of computation in a nonmarket system. Eliminate economic calculation and you have no means of making a rational choice between various alternatives.

Private ownership of the means of production is the fundamental institution of the market economy. It is the institution which characterizes the market economy as such. Where it is absent, there is no question of a market economy.

In an economic system in which there is no private ownership of the means of production, no market, and no prices for goods, the concepts of capital and income are mere academic postulates devoid of any practical application. In a socialist economy there are capital goods but no capital.

The notion of capital makes sense only in the market economy. It serves the deliberations and calculations of individuals or groups of individuals operating on their own account in such an economy. It is a device of capitalists, entrepreneurs, and farmers eager to make profits and to avoid losses. Profit tells the entrepreneur that the consumers approve of his ventures; loss, that they disapprove.

The problem of socialist economic calculation is precisely this: that in the absence of market prices for the factors of production, a computation of profit or loss is not feasible. The paradox of “planning” is that it cannot plan, because of the absence of economic calculation. What is called a planned economy is no economy at all. It is just a system of groping in the dark.