Capital and Income in Democratic Socialism

Abstract: Some scholars of the Interwar Debate on Socialism argue that the trial and error method developed by Taylor (1929), Lange (1938), and Dickinson (1939) proved that socialism could match or outperform capitalism. Other scholars argue that the trial and error method of simulating markets was an illegitimate compromise between true socialism and capitalism. The market socialists failed to understand the nature of the challenge that Mises (1920) posed. This paper argues that Lange, Lerner, and Dickinson effectively conceded what Mises wrote about capital accumulation in socialism. Lange and Dickinson also argued that capitalism fails regarding capital accumulation. Lerner, Lange, and Dickinson believed that democracy could solve some of the problems of socialism. Mises and Hayek saw the politicization of investment as at best, inefficient and at worst, dangerous for democracy. The antagonists in this debate agreed on many of the economic issues, but disagreed on matters of social philosophyespecially where democracy is concerned. Recent scholarship on market socialism has tended to overlook the issues raised by both sides in the interwar debate. Also, the record of the twentieth century tends to support the von Mises critique of socialized accumulation.