[OPE-L:4821] Re: opposition to Hayek

Duncan K. Foley (dkf2@columbia.edu)
Sat, 19 Apr 1997 21:04:48 -0700 (PDT)

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In reply to Paul and Allin's comments on Hayek.

I'm not satisfied that your reply, emphasizing better use of technical
tools like input-output tables and computers in planning, really comes to
grips with Hayek's point as I understand it.

His argument is not that the market is a kind of super-computer (though I
suppose he views it as that, too), but that the market forces individuals
to reveal private information about economically relevant issues like their
technologies and valuation of commodities by forcing them to take a
position in the market with something of value at stake. In this way of
thinking, the market both identifies and exploits "arbitrages" between
suppliers and demanders. In a dynamic context this is important because it
is the engine that drives the system through processes of technical

While Hayek's way of talking about this issue is different from Marx's, I
suspect that the two have compatible views on this process in capitalist
production. Marx's way of talking about these issues is his theory of
super-profits to innovators in capitalist production as driving technical
change and the falling rate of profit. It's not hard to see that this in
contemporary economics language an "arbitrage". Thus in the context of
capitalist production, I don't think Hayek's point is inconsistent with
Marx's ideas.

This does pose a problem for the theory of socialist planning. I wouldn't
go so far as Allin to say that if we even acknowledge this issue we might
as well forget the entire issue of socialist planning and socialism as
well. This seems to identify "socialism" with one vision of centralized
economic control. I don't see any warrant for this in Marx's work, since he
doesn't discuss socialist planning very much, and his writing on the "free
association of labor" is open to a wide range of interpretations as to the
exact implementation of the organization of production.

It seems to me, in fact, that it is absolutely necessary to come to terms
with the substance of Hayek's critique in order to breathe life into
socialism as a practical political project at this point. The communist
countries seem to have failed economically precisely in the areas of
technical innovation and identification of relevant social arbitrage. (I
don't think they did as badly as Hayek claimed they would have to, or as
the neoliberal critics of communism make out, but it's hard to escape the
conclusion that they messed things up somehow. One important point is that
none of the communist economies actually ran a pure version of planning,
and all of them developed informal "market-like" relations around the edges
of the planning process.)


Duncan K. Foley
Department of Economics
Barnard College
New York, NY 10027
fax: (212)-854-8947
e-mail: dkf2@columbia.edu