Friedrich von Hayek: The Socialist-Calculation Debate, Knowledge Arguments, And Modern Economic Development

At the close of the nineteenth and the commencement of the twentieth century, socialism began to gain momentum as a large-scale movement in Europe and the United States. This popularity was supported by an increased influence of the working class in society, which put pressure for representation upon European parliaments and began to secure concrete improvements in labor protection laws. Moreover, socialist proponents looked hopefully towards the living example of the Soviet Union, which began its socialist experiment in 1917 following the success of the Bolshevik Revolution. Socialism, which found its economic grounding in the legacies of such men as David Ricardo and Karl Marx, tended to encourage a more central and vital role for government intervention in the economy. Thus economists who favored a socialist-oriented change in contemporary societies began to develop theories intended to address such issues as “where, when and how the state should intervene in economic life” and how societies might be successfully reorganized so as to be based upon these new precepts. [excerpt]