[OPE-L:2516] Re: Re: Re: RE: Welfare functions

From: Allin Cottrell (cottrell@ricardo.ecn.wfu.edu)
Date: Wed Mar 15 2000 - 09:52:21 EST

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On Mon, 13 Mar 2000, Duncan K. Foley wrote:

> The Bergson-Samuelson social welfare function ... is
> supposed to represent the allocational priorities of a
> planner directly. They may or may not be built up on the
> utility functions of individual households (if one believes
> in utility functions). One way to conceptualize a socialist
> planning process (or allocational process) is in terms of
> such a social welfare function, which does not depend on the
> conditions for community indifference curves. (I share
> Allin's skepticism that one could just set up a big
> mathematical programming problem to do allocation in a
> socialist society. But if not that, exactly how might it be
> done?)

I agree that it is necessary to find a coherent middle ground
between (a) a fantastical mathematical super-optimization and
(b) the notion that people "just get together from time to
time" to work out the plan. Paul and I have tried to do that in
various writings


and it's hard to summarise our suggestions in a few sentences.
Broadly, we try to distinguish a number of different levels of
decision making. For large, long-term decisions on the "shape"
of the economy we recommend open popular debate over
pre-balanced plan variants (which might, for example, place
different weights on environmental conservation) terminating in
a popular vote. In effect this is the construction of a
social welfare function on the hoof, via debate. I doubt
whether it can be done a priori.

We also envisage a more automatic, algorithmic, process for
lower-frequency choice of technique and adjustment of specific
consumer goods output in line with demand: that's where
labour-time comes in -- as something to be minimized (as a first
approximation) in choosing techniques, and as defining an
equilibrium condition for the consumer goods mix (labour time
required to produce good X = labour-time that people are willing
to pay for X, in the form of 'labour-tokens').

> The classic argument against using embodied labor
> coefficients in any form of socialist planning ... is that
> they do not include any element of intertemporal tradeoffs
> except in a very stringent case (equal organic compositions
> of capital), and thus are potentially a misleading guide to
> allocation.

Samuelson and Weiszacker show that the degree to which simple
labour-values are "misleading" is a function of the growth
rate. In a mature economy with relatively modest annual growth
labour values will be pretty good; they can also be adjusted
using a growth-rate multiplier if desired: scale up all elements
of the Leontief inverse by a factor 1 + g.


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