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There is a famous anecdote about the very first meeting in 1947 of the Mont Pelerin Society, the organization founded by Milton Friedman, F.A. Hayek, Ludwig von Mises and other famous free marketers who later won Nobel prizes and inspired Margaret Thatcher and Ronald Reagan, among others. The story goes that von Mises stormed out of one session declaring, "You’re all a bunch of socialists!"

None of the oral traditions recall what heresy prompted this extremely prejudicial accusation, for surely no one in that circle was actually advocating genuine socialism. Maybe Friedman wavered on whether there should be any public welfare provisions in the ideal free market state.

But that story has come back to me as I listen to the commotion about people calling Barack Obama a socialist. If we understand socialism in its strict definition--central economic planning and public ownership of the means of production--then the president is obviously not a socialist (with a mild caveat for the auto bailouts, the banks, etc).

But if we step back a moment and consider "socialism" more broadly as a step increase in political control of or intervention in the economy--whether it be through a revival of Keynesian-style stimulus and things like "cash for clunkers" subsidies, or through a government semi-takeover of the health care sector--then the charge appears more salient.

The serious conservative critique of these socialist-like forms rests, in one sentence, on the cognitive barriers to government commanding or allocating resources effectively, which means we can expect very poor results, resembling the sluggish, centrally directed economy of Britain in the 1970s.

That wasn’t exactly socialism either, but Ms. Thatcher effectively campaigned against it by calling it by that name, and it looks like we may need to sweep away those kind of shackles again a decade from now.

Steven F. Hayward is a resident scholar at AEI.