Information and the Market Economy: A Note on a Common Marxist Fallacy

M arxists have seldom been noted for much economic sophistication in their critique of the capitalist market economy. Marxist reasoning was essentially easy game for Mises ([I9201 1990) in his classic initiation of what came later to be called "the socialist calculation debate." However, later market socialist contributions to this debate were for a long time believed to have provided the definitive answer to Mises's challenge. As we all know well today, this understanding is completely fallacious (Lavoie 1985; Salerno 1993; Steele 1993), and as result of the Austrian critique of socialism, many contemporary socialists have become unsure of the viability of the socialist project (for example, Gamble 1986; Hahn 1990). However, socialists have certainly not given up hope. In a relatively recent article, the Marxist John O'Neill (1989) put forward a radical critique of the market order; one that has often been given more implicit articulation by other socialists, but had not been given its fully explicit statement until O'Neill's article. I will here argue that this critique amounts to a fallacy. Although O'Neill's critique was directed towards the increasing prominence of market socialism, he primarily argued against perhaps the best known Austrian defense of the market, that is to say, Hayek's conceptualization of the market a s a n information providing mechanism. Hayek's conceptualization and corresponding defence of the market in knowledge terms is well-known and influential among recent market socialist writers. Mises's ([I9201 1990, 1949) different and even more fundamental conceptualization of the calculation problem as one of