This is always a fascinating refutation. All you're complaining about is the need to reinvest resources into production, and for the tendency of the rate of profit to fall. As wages and profits go down, so do prices in a market socialist system.
I also find it dubious when you declare that there would be direct, democratic control of the means of production. Certainly, voting on the ratios of investment, allocation of labor, and volume of production for every single good would be incredible obtuse if done on a large enough scale (and, eventually, you will have to vote on the macro scale. We live in a complicated international system of trade). The alternative would be to make it possible that the commune of Iowa could unilaterally shut down a major source of corn to the world, and so on and so on. Even in primitive communism, there was not democratic control. Rather, it was either simply understood that people took what they needed from their neighbor with the knowledge their neighbor would do the same when they were in need, or there was a particular group that would organize distribution, women's councils, a village elder, ect. The division of labor, however, was almost always predetermined, usually along sexual lines or some other custom.
What you are advocating for, though you may not realize it, is a democratized asiatic mode of production. The asiatic mode of production of course, being states that would take control of production, state's in the control of a private ruler or royal family. Now certainly, these goods were sold on a market, but not a market like we are used to, or like marx was. Money as hard currency was rarely used, instead, credit was used. Indeed, in many ancient systems, we see that by ranking goods in tiers, there was in-kind calculations. Sound familiar?
It should be telling that when the state did assume this role it was always a monarchy and never a republic. Republics were always a form of class rule where it was the commercial class, the capitalists, merchants, and landed aristocrats sharing power, thus, it was quite necessary for republics to protect private ownership of the means of production and with a wide number of owners. The asiatic mode of production, rather, has one single, private owner, and consolidates production under that owner through the state. The logic of growth and wealth creation continues. But consider for a moment, if we did have an actual democratic political system instead. We may get some very odd results, with popular goods being demanded in large volumes, but given less in terms of labor, resources and investment. For example, consider an agricultural economy that wants to produce more in consumer goods, but still has a big demand for "cheap" food. This is exactly what occurred in poland in the 80's, to disastrous results.
When we do get proposals for systems that balance democratic control, with the need for a coherent system, we get things such as Cockshott's, which, by his own admission, continues the law of value that seems to be your only critique of market socialism.
Where market socialism succeeds in that it preserves the progressive forces of the law of value, while having even more democratic control, and I would say, even more stability than cockshott's system. After all, if something were to go wrong in such a system, it would immediately be blamed on not a particular decision, but socialism itself. Whereas, by continuing the division of society into market and state, if something goes wrong, you can just blame one or the other, while the overall order stays chugging along, destined towards full automation thanks to that very competition and tendency for the rate of profit to fall.
