One of Ludwig von Mises’s important contributions to economics was demonstrating the impossibility of economic calculation under socialism. He did it by showing three necessary preconditions for the generation of meaningful market prices in the factors of production—private property, freedom of exchange, and sound money. Since socialism would, by definition, socialize the factors of production, there would be no nonarbitrary and meaningful way to calculate the prices of various factors of production, the costs of alternative plans in money prices, and expected future profits of a given plan minus the costs.
In short, when factors of production—producer goods (tools, machines, etc.)—are privately owned, there is freedom to trade property. When the economy has advanced to using money, which
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