[OPE-L:2726] socialism and planning

Fri, 26 Jul 1996 10:14:32 -0700 (PDT)

[ show plain text ]

Responding to Duncan's [OPE-L:2725]:

> Perhaps we ought to start a thread on the problem of allocation and
> planning in a socialist economy, since we seem to be drifting into a
> discussion of it without much structure. I think this discussion will
> inevitably also touch on different people's interpretation of the collapse
> of the "socialist" regimes in the Soviet Union and Eastern Europe.

I agree that these issues should be separated into distinct threads and
have re-labeled the subject line. I also, however, believe that issues
associated with "the allocation and planning in a socialist economy" need
to be kept somewhat distinct from a discussion of our interpretations of
the collapse of "socialist" regimes.

> 1) Has the historical experiment of the "communist" regimes demonstrated
> fundamental flaws in any system of centralized allocation of resources?
> Has it validated Hayek's criticism of Lange on the ground that the real
> function of markets is to force social actors to divulge private
> information? Does it show that centralized planning mechanisms are
> incapable of fostering viable innovation?

The marginalist critique of centralized planning focused on the efficiency
of markets in the coordination of the economy. Hayek's criticism, as well
as "market socialist" responses by Lange et al, however, missed the point,
IMHO. The question of socialist organization and decision-making is not a
mathematical question related to whether it is possible to develop a
model which can optimally allocate resources to meet social needs. That
technocratic approach misses the fundamental social questions: *who* is
making the social decisions and in *whose interests*?

As for innovation, the marginalist assumption has always been that this
could only result (efficiently) in the presence of scarcity by the actions
of atomized individuals pursuing self-interest and by being rewarded
accordingly for their initiative. Under socialism, the criteria for
innovation becomes quite distinct from the capitalist criteria associated
with capitalist practice. The questions here are fundamentally: what
*kind* of innovation? ... for *what* social purpose? ... and by *WHOM*
(the "party", the "planners", the state, or FREELY ASSOCIATED WORKERS)?
Moreover, the behavioral assumption that individuals are only motivated by
self-interest is, at best, highly suspect when it comes to considering
socialism (of course, a discussion of this question would get us into the
much discussed questions and debates around "moral" and "material"

> 2) If centralized planning is still a viable option, how should it be
> organized in principle and in practice. Should a social welfare function
> embodying social priorities be used in principle to assign shadow prices?
> What role do embodied labor coefficients have in a planning mechanism,
> either as approximations to shadow prices or on their own? Should an
> interest rate be charged in costing investment options?

There are a multitude of possible solutions to these administrative
questions. The key ingredient in determining which possibilities are
THE SOCIAL-DECISION MAKING PROCESS. This should be one lesson from the
downfall of the "socialist" nations. Without socialist democracy there can
be no socialism (only a stale characature in which the decisions by an
elite are imposed on workers).

> 3) Are there any credible alternatives to centralized planning schemes as
> substitutes for commodity allocation methods? How would they reproduce
> themselves socially?

I can't help but believe that there was a reason why Marx was leery of
developing any "blueprints" for socialism (as the "utopian socialists"
had). While we have the historical experience of the former USSR as well
as other "socialist" nations to evaluate, we have to accept that there are
certain questions which will only be answered by future workers in the new

In OPE-L Solidarity,