Calculation in kind

Calculation in kind or calculation in-natura is a way of valuating resources and a system of accounting that uses disaggregated physical magnitudes as opposed to a common unit of calculation. As the basis for a socialist economy it was proposed to replace money and financial calculation.[1] Calculation in kind would value each commodity based only on its use value, for purposes of economic accounting. By contrast, in money-based economies, a commodity's value includes an exchange value.

Calculation in kind would quantify the utility of an object directly without recourse to a general unit of calculation. This differs from other proposed methods of socialist calculation, such as simultaneous equations, Taylor-Lange accounting prices, and the use of labor time as a measure of cost.[1]

Calculation in kind was strongly advocated by the positivist philosopher and political economist Otto Neurath when employed by the Bavarian Soviet Republic. This led to a discussion in the early 1920s, in which much of the discussion about socialism centered on whether economic planning should be based on physical quantities or monetary accounting. Neurath was the most forceful advocate of physical planning (economic planning using calculation-in-kind) in contrast to market socialist neoclassical economists who advocated use of notional prices computed by solving simultaneous equations.[2] Austrian school critics of socialism, particularly Ludwig von Mises, based his critique of socialism on the calculation problem.[3]

Proponents of in-kind calculation argue that the use of a common medium like money distorts information about the utility of an object. Socialists in favor of calculation in kind argued that, in a system of in-kind calculation, waste associated with the monetary system would be eliminated, and in particular objects would no longer be desired for functionally useless purposes like resale and speculation – they would only be desired for their use-value.[4]