Monetary calculation is the guide of economics.  The economy is chaos without it.  Calculation makes it possible to determine if there is profit or loss.  Not just a business, various sectors of operation within a business.  An entrepreneur will fund the profitable sectors and defund the losing sectors.  An entrepreneur funding the losing sectors won’t be an entrepreneur for long.  Monetary calculation is impossible unless there is private ownership of the means of production.

All goods and services are bought and sold against money—with a few exceptions.  When statistician summarize total profits, all they’re doing is adding up the profits and losses of individuals.  Adding up individual profits and losses to come to “social” profit is completely meaningless.  “Social” profits and “social” welfare are imaginary and are just emotive terms.  Profit can only be applied to an individual/business, never society.

The system of private ownership of the means of production is the free enterprise system.  The most important feature of the free enterprise system is capital.  Thus, the system has been labeled as capitalism, initially by the enemies of the free enterprise system.  However, this term is applicable and has remained.  Calculation is a requirement for capitalism.  This is a reality and reality disgusts them.  They just want to believe in a magical social order.

Monetary calculation is necessary for civilization.  If the method of economic calculation was given up, civilization would perish.  This is not a theory.  This is a fact of life.  As Goethe said, “What advantages does he derive from the system of book-keeping by double entry? It is among the finest inventions of the human mind.”  Goethe was certainly right.  We are not far off of destroying one of the finest inventions.

Monetary calculation has a definite role in economics.  However, monetary calculation is much more important than that.  It’s critical for civilization as a whole.  This may seem like a nuanced economics topic, but it’s very far from that.  It’s crucial to our survival.  Calculation becomes more and more difficult as the economy grows.  We must preserve monetary calculation to preserve civilization.  The decline of civilization will go unnoticed if calculation isn’t understood.

Reference

Ludwig von Mises; The Mises Reader