At the end of "The Use of Knowledge in Society," Hayek was doubtless   
responding to Schumpeter's discussion of socialism in Capitalism,   
Socialism and Democracy, first published in 1942, and perhaps especially   
to the chapters titled Clearing Decks and The Socialist Blueprint, where   
Schumpeter states "Can socialism work? Of course it can." and "There is   
nothing wrong with the pure logic of socialism."  Schumpter reached these   
conclusions by noting that from the perspective of static general   
equilibrium theory, there is no difference between a pure market system   
and a pure socialist system. From Hayek's perspective, Schumpter was   
misled by his theoretical tools.   
  
Bruce Caldwell