[OPE-L:2735] Re: socialism and planning

Duncan K Foley (dkf2@columbia.edu)
Sun, 28 Jul 1996 10:38:05 -0700 (PDT)

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On Fri, 26 Jul 1996 glevy@pratt.edu wrote:
(among other things)
> > 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 far as I can tell, Lange and Lerner successfully rebutted the
marginalist critique of planning by demonstrating the isomorphism between
efficient planning and markets, and their rebuttal was widely accepted.
Hayek's point, however, was at a different level, and in my view raises a
question that socialists need to think about very hard. As I read his 1938
essay (which I think is actually the best exposition of the issues), Hayek
sees markets not as allocational devices (in fact he is not very
interested in the concept of efficiency) but as information processing
devices. For him the issue of the market is to put individuals in a
position where they are forced to divulge their private information
through their transactions in the market. Thus Hayek seems to have raised
more sharply the problem of how a central planning mechanism, no matter
what its political structure, gets the information on the basis of which
it can make coherent decisions.

> There are a multitude of possible solutions to these administrative
> questions. The key ingredient in determining which possibilities are
> tried *should* be tried is the DEMOCRATIC PARTICIPATION AND CONTROL OVER
> 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).

I think this is a good slogan, but not really a method. I don't relish the
idea of trying to run a modern industrial economy on the basis of
democratic participation and control over every level of the economic
process. It seems to me that there has to be some articulation between
effective political processes that can democratically evolve general
priorities and principles of allocation and the actual process of
production and distribution.

> 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
> society.

I've often given this type of answer myself, but I don't really believe in
it any more. I think the historical experience of the USSR was very much
bound up with the lack of any coherent understanding of the problems of
economic management with which the Bolsheviks started in 1917. (I think
the political failings were probably more even more acute, but the
economic and political systems very much intertwined.)