Re: [OPE-L] Market Socialism: Ian Wright & Ian Hunt

From: Ian Wright (wrighti@ACM.ORG)
Date: Mon Apr 30 2007 - 13:06:12 EDT

Hi Alejandro

Thanks for your reply.

> The issue is that if you read the later Marx (some times it seems to me that
> there are several Marx's), that one who thought in a labour time accounting
> as a basis for day to day production and exchange in absence of markets, you
> find arguments that talk about the superiority of planning compared with
> market precisely because the direct satisfaction of needs. That Marx seems
> has thought in the overcoming of postfestum satisfaction of need. And it is
> logic because in absence of this supposed planning's capability left very
> little to justify the market cancellation.

I don't find Marx's limited remarks on post-capitalist organisation to
be a sufficient basis to decide such difficult questions.

> Could you solve the calculation in absence of stable states? Market
> economies of course have relatively stable states. Without those, C&C has
> rightly stated that price channel loose its informational function. But you
> might note that what Austrians and a few market socialists (maybe Heimann,
> Nove and of course I) have in mind are the non-stable states that
> entrepreneurs are capable to lead thanks to (1) rivalry in an appropriate
> scale and (2) the goal of increase profit firms as an indicator of success
> in consumers' satisfaction. Of course, it is dubious that capitalism
> defended by Austrians could achieve this.

The first question to ask regarding the debate of plan vs. market is:
- What are the economic requirements that a post-capitalist economy
should try to satisfy?
- What are the normative criteria for evaluation?
Before this is answered, it is pointless to step down into a technical
debate about mechanism design.

What are the requirements that you want to satisfy with market
socialism? Which social ills, which are the result of capitalist
economic organisation, do you wish to eradicate? (A large and
difficult question, I know, but an important one in order to frame the

> My opinion concerning this point has intimately related with my last
> statement. Because the task of lead the non-stable states that expand our
> technological frontier, we shouldn't compromise with a single form of firm
> organization. It doesn't imply that we have to neglect the distribution of
> revenues: it depends on the rate of investment democratically chosen and the
> financing of an ambitious Welfare State. As you may suspect, we can be free
> from the "realm of necessity" thanks to the non-market devises the Socialist
> Welfare State would able to manage.

We can have many different kinds of firm organization. But there is a
level of abstraction higher than this -- specifically, the contractual
relations of the co-operating parties that specify the rules for the
distribution of profit. (More on this below).

> I think Paul has that position because he underestimates the non-stable
> states in market economies and its social function in freeing us from the
> "realm of necessity", in the sense of the expansion of the possibility
> frontier.

In their book C&C do discuss political mechanisms for the allocation
of resources to expand the production possibility frontier. But if I
recall the political mechanisms are not well integrated into the
economic design. So I think you have a point here.

> The rent derived from property held would not exist under market
> socialism because the state would be the stockholder.

I am wary of any form of stock. If the state is the stockholder, and
therefore has a claim on the profit of all firms in the economy, how
is it going to wither away? Won't it be extraordinarily strengthened,
with all the dangers that implies?

> Of course, we
> shouldn't prohibit small private property. Would you agree to imprison to
> anyone who start a business.

I think starting a business is a kind of "free association" -- anyone
should be able to do it. But it depends very much on what kind of
"business" it is.

By definition in a post-capitalist society, some of the social
relations that are legal now would no longer be. So we should not
legally prevent the starting of a worker co-op or similar. But we
should legally prevent the starting of a "business" that has a class
of stockholders.

Markets are regulated by law. Some contracts that in principle could
be freely entered into by two parties are illegal under capitalism,
and would lead to legal sanction. For example, an 18 year old cannot
capitalize their future income stream and sell it for a lump sum now.
That would be a kind of voluntary slavery, illegal under capitalism.

So I hope you would agree that the mechanism of a market does not
imply the absence of legal constraint, especially when the legal
constraint is imposed via a democratic mandate.

> And we should be cautious about running a
> beginning business because we can't know ex-ante if consumers' would be
> pleased. Of course we have to share some risk in arranging loans as do
> capitalist banks.

Yes sure. But capitalist firms hire in labour. A socialist firm hires
in money-capital. In this case, once the advance(s) of money-capital
are paid back, at a rate of interest agreed in the market, which will
factor in the cost of risk, the lenders of money-capital no longer
have a claim on firm profits. This is quite different to the holding
of stock. In this case, even when initial advances are paid back, the
lenders of money-capital retain their claim on firm profits.

In your scheme, if the state is the ultimate stockholder, then is it
fair to characterise it as "state capitalism"?

Best wishes,

P.S. Thanks for the Austrian papers!

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