The Star Trek Supposition

The problem of central economic planning is one of calculation.

In order for an economy to function, a means must first be in place to allocate scarce resources. A free market economy uses price to convey information to individuals about the scarcity or desirability of resources. Then they make a decision about how to get the best use or utility out of available resources, based on their own rational self interest. As a result markets allocate resources very efficiently.

In a socialist system the resources and means of production are owned by the state. This makes trade an internal transfer of resources within the state. Since goods never really change hands, there is no rational means to determine price, so the state sets one. Man has never yet achieved a means of accurately determining human utility through calculation. When coupled with how sensitive complex calculations are to initial conditions, efforts to allocate resources in socialist economies are at best highly inefficient. Even on paper, socialism only appears viable if one removes the problem allocating scarce resources by assuming resources are infinite.

I call this the Star Trek supposition.

In the fictional world of Gene Roddenberry's Star Trek, the Earth has adopted a one world government, through membership in a vast United Federation of Planets. The Federation utilizes a socialist economy in which the member planets share ownership in the resources of all other members. The calculation problem is eliminated through interplanetary expansion, providing access to practically unlimited resources, and advanced technology which abundantly provides cheap energy. As a result, the inefficiencies inherent to central planning do not render the system in-viable.

But this is the real world, and resources are finite. It is necessary to allocate resources as efficiently as possible, so as not to exhaust our resources before we have the technology to seek reserves elsewhere. Until that time, like Star Trek, socialism's viability will remain a work of fiction.