Re: [OPE] Kyn against the New Socialism of the 21st Century

From: Paul Cockshott <>
Date: Mon Apr 12 2010 - 14:38:02 EDT

I have now read Kyn's protest.

I have at no time indicated that Kyn was a current supporter of socialism. He did however do pioneering work on the computation of sectoral labour values using input output tables, this preceeded the work of Shaikh and his students at the New School, and it seemed therefore appropriate to give him credit for the work that he did in the 1960s. I had already gathered from his current position that he is no longer a socialist.

From: [] On Behalf Of Alejandro Agafonow []
Sent: Friday, April 09, 2010 11:07 PM
Subject: [OPE] Kyn against the New Socialism of the 21st Century

I received this in my in-box

A. Agafonow
---------- Forwarded message ----------

Kyn against the New Socialism of the 21st Century

By Oldrich Kyn

On many Latino-American websites recently appeared articles connecting my
name with the so-called "Socialism of the 21st Century". I intend to
demonstrate here, that there is no basis for such a connection. Virtually
all my publications and activity during the past 50 years can be shown to
aim in the opposite direction.

To make it clear I am not writing here about socialism in general, but about
the two new but very similar theoretical designs of socialism, namely the
"New Socialism" of Cockshott and Cottrell and the "Socialism of the 21st
Century" by Heinz Dieterich Steffan who has been the adviser to Hugo Chavez
of Venezuela and Rafael Correa of Ecuador.

It seems that some people believe that both Venezuela and Ecuador are
already close to achieving that kind of socialism. But I do not believe so.
Some economic changes might be introduced and presented as steps in building
it but it is not very likely that the building would ever be completed.
True, it has some powerful supporters in those mentioned countries and
possibly also in some others so that they may for a few years try to build
it, but then they will most likely discover that they were mislead by the
designers and that it is not going to work. Of course it is impossible, to
predict the future with certainty, so I may be mistaken, however I have good
reasons to believe that what I have said is true because my conclusions are
based both on extensive knowledge of relevant parts of economic theory and
many years of practical experience with various forms of socialist
economies. Please note that by criticizing specifically these two new types
of socialism I do not want to imply that some other types of socialism are
either good or bad. The term 'socialism' is used for many very different
forms of the economic and social system and not just those designed and
created by Marxists.

 As I mentioned above, I am considering the "Socialism of the 21st Century"
primarily because Heinz Dieterich in his article that appeared originally on
the Rebelion website (<> <<>>) and soon
after that was reproduced at about 40 other Latino-American websites used my
name as if I were one of the contributors to his socialist fantasy. Here is
the relevant paragraph from his article:

               "The glacial epoch of the worldwide debate provoked by the
fall of the historical socialism has ended. .... Young scientists, veterans
of the historical socialism, and social revolutionaries are being "dragged"
towards the new "dawn of the reason," as Hegel would say. The contributions
of the School of Scotland and of the School of Bremen that broke the imposed
taboo, are related increasingly to the valuable experiences of the
ex-socialist countries-- see the essay of the Russian economist Menshikov on
Kantorovich's Economic Model, or that of Oldrich Kyn et al., a group of
Czechoslovakian scientists linked to the Central Planning Office who, early
on, in 1967 used input-output matrices to calculate the values of 25,000
products for the Czechoslovak economy."

This statement requires extensive comments but before that I should add just
for information that the "School of Scotland" mentioned above means Paul
Cockshott and Allin Cottrell and the School of Bremen includes among others
Heinz Dieterich Steffan himself. Kantorovich is obviously mentioned because
he developed the mathematical planning technique today well known under the
name "linear programming". Cockshott, Cottrell and Dieterich wrongly believe
that it can be used for the system of physical central planning in the
economy without the market mechanism. My name is mentioned probably to
demonstrate the possibility of labor value calculations as well as use of
large scale computer calculations for central planning.
The term "Socialism of the 21st Century" today appears on hundreds of
various websites. On January 2, 2007 the Rebelión
<> website and one day after
that also MRZine (the Monthly Review Website) brought the interview with
Heinz Dieterich by Cristina Marcano that was published under the title "In
Venezuela, Conditions for Building Socialism of the 21st Century Have Been
Here are some excerpts from this interview:
"Q. Professor Dieterich <>, did
you invent the concept of "Socialism of the 21st Century"
A. Yes. I developed it, beginning in 1996. It has been published with its
corresponding theory in book form, from 2000 on, in Mexico, Ecuador,
Argentina, Central America, Brazil, and Venezuela, and, outside Latin
America, in Spain, Germany, The People's Republic of China, Russia, and
Turkey. Since 2001, it has been appropriated all over the world.
Presidents like Hugo Chávez and Rafael Correa use it constantly, and so do
labor movements, farmers, intellectuals, and political parties."
Dieterich then adds that it should be "a socialism in which the majorities
have the greatest historically possible degree of decision-making power in
the economic, political, cultural, and military institutions that govern
their lives."
On the question "What would be the decisive step that the President would
have to take to arrive at 'Socialism of the 21s Century' in Venezuela?"
Dieterich answered:
"They are two: 1. to gradually replace the regulating principle of market
economy, price, by the regulating principle of socialist economy, value,
understood as time inputs (insumos de tiempo) necessary for the creation of
a product; and 2. to advance the economic participation of citizens and
workers at three levels: 1. at the macroeconomic level (e.g., national
budget); 2. at the mesoeconomic level (municipality); and, 3. at the
microeconomic level (enterprise)."
In other words, Dieterich's "Socialism of the 21st Century" would be based
on participatory (sometimes also called labor-managed) economy with prices
determined not by supply and demand, but centrally according to the Marxian
labor theory of value.
This is quite similar to the type of the "New Socialism" Paul Cockshott and
Allin Cottrell were promoting in their book written in 1989 that was also
translated into several languages and published in respective countries
during the years following 1990. In the recent article that appeared on the
web Paul Cockshott characterized it in three points:
1. "The economy is based on the deliberate and conscious application of
the labour theory of value as developed by Adam Smith and Karl Marx. It is a
model in which consumer goods are priced in terms of the hours and minutes
of labour it took to make them, and in which each worker is paid labour
credits for each hour worked. The consistent application of this principle
eliminates economic exploitation.
2. Industry is publicly owned, run according to a plan and not for
profit. State retail enterprises for example, work on a break even rather
than profit making basis.
3. Decisions are taken democratically, both at a local and a national
basis. This applies in particular to decisions about the level of taxation
and state expenditure. Such democratic decision making is vital to prevent
the replacement of private exploitation with exploitation by the state."
The crucial feature common to both discussed types of socialism is removal
of the market generated prices and replacing them with the Marxian
labor-values. But this creates a significant problem. While market prices
are formed spontaneously by competition, the labor values need to be
calculated. It is normal that there are several millions of different
products in a typical country, and they are mutually interrelated, because
some serve as inputs in the production of others. This means that not only
enormous quantities of data would have to be collected but also that for
calculation of labor-values it would be necessary to solve millions of
simultaneous equations. Even with superfast computers, this would not be an
easy task.
The other aspect of both the "New Socialism" and the "Socialism of the 21st
Century" creates similar problems. Centralized quantity planning without
market requires not only collection of even incredibly larger quantity of
data, but also a solution of additional millions and millions of
simultaneous difference equations.
Using my name as an evidence of feasibility of such type of value
calculations and of possibility of quantitative central planning without the
market mechanism is not only wrong but it is absurd. I have never had any
contact with Dieterich and my first e-mail exchange with Cockshott happened
only about a year ago. At that time it became quite clear to me that
Cockshott and Cottrell and most likely Dieterich as well knew almost nothing
about me and about my publications and activities during the past fifty
years. They did not know what has been really done in mentioned price
calculations of 1960's they knew nothing about my role in the critique of
Marxian economics and in promoting the knowledge of the modern non-Marxian
economics in Eastern Europe. They knew nothing about my critique of the
non-market over-centralized socialism and about my active participation in
the design and implementation of the reform reintroducing market into the
Czechoslovak economic system. They did not know that after the Soviet
invasion of Czechoslovakia in August 1968 I emigrated and after 3 years at
Berkeley spent almost 40 years teaching economics at Boston University. They
did not know that I continued with my activities by publishing, attending
and organizing seminars and conferences, helping with research at OEI
Munich, AERC Karachi, Pakistan, Ministry of Finance, Kuala Lumpur, Malaysia
and several other places. They did not know that in early 80's Chinese
government invited me to help with the transition to the market economy.
Cockshott and Cottrell are still discussing with their friends the ways how
to calculate labor values (see
<> ) while together with my
colleagues I published many papers and even a book about it long time ago.
Several of these papers were in English and one even in Spanish. In addition
to that our calculations were discussed at various international seminars
and conferences, were mentioned in several publications and similar
calculations were performed also in the former Soviet Union , Hungary,
Poland ,Yugoslavia, China and some other countries.
I am going to show here that my publications and activities were reasonably
well known all around the world and therefore the fact that Cockshott and
Cotrrell knew nothing about it and that Dieterich wrongly attributed to me
the positive attitude towards Marxist theory of value and physical planning
without the market does not testify well about their research abilities.
Hundreds of my students from countries all around the world, both
undergraduate and graduate, learned not only about our price calculations
but also about my other publications and activities. Some of my students
even performed price calculations or estimated econometric models as home
assignments, using the data of their own countries. Many of those students
have later reached leading positions in governments, banking systems,
private organizations of their countries or in international organizations
as the World Bank, IMF etc. This can be seen at
Vaclav Klaus is now the president of the Czech Republic. This is how he saw
the situation at the Prague Economic Institute in 1964, when he joined as
research assistant and also started his Ph.D. studies:

"... the Economic Institute ... was unusually liberal and only because of
that I began to sense what is economics all about, .... There were regular
seminars there, where the contemporary economics were discussed and where
instead of doing what we were paid for, that is to criticize the non-Marxian
economics, we were doing just the opposite. We studied non-Marxian economics
and criticized the Marxian one. (I would like to mention the names of those
who at that time were my one generation older colleagues and teachers, and
from whom I learned a lot - J. Janis, M. Rumler, O. Kyn, V. Mueller, J.
Chlumsky, L. Smetana and .... Rita Budinova - Klimova, our future ambassador
to the USA.)" (V. Klaus p.342)
Paul Craig Roberts, was in 1960's graduate student at the University of
Virginia and wrote his dissertation with Warren Nutter the well known critic
of the Soviet-type economy and my friend. Paul Craig Roberts attended five
lectures of mine at the summer course about Economics of Eastern Europe in
Tremezzo Italy. Even though it might seem questionable, whether I should
think about him as my student, he wrote me recently that he would be honored
if I did. Roberts early publications were about Marxism and economics of
East European socialist countries, but he later became Assistant Secretary
of the Treasury under Ronald Reagan
<>and formulated the
principles of the macroeconomic policy known under the names of Supply Side
Economics or Reaganomics <>. Until
now he is still one of the most prolific writers about economics, he was for
some time the editor of Wall Street Journal, wrote frequently columns in
Business Week and his syndicated columns are appearing very frequently on
the web.
At least 13 of my students were at different time ministers in governments
of various countries:
Santiago Levy Agazy, is today the deputy president and chief economist of
the Inter - American Development Bank and for five years in the past was
General Director, 'Instituto Mexicano del Seguro Social'and member of the
Mexican Government.
Arturo Montenegro, Minister of Economy Quatemala. Jorge Rodriguez Grossi,
Minister of Economy Chile. Hugo Lavados, Minister of Economy Chile. Eduardo
Bitran, Minister of Public Works, Chile. Fernando Aramburu Porras, Minister
of Finance and Economy, Panama. Javier Comboni, Minister of Finance,
Bolivia. Muhiuddin Alamgir, Minister, Bangladesh. Samuel Ashong, Minister
of State at the Ministry of Finance
and Economic Planning, Ghana. Abdul Hafeez Shaikh, Federal Minister for
Privatization and Investment, Pakistan. Lee Suk Chae, Minister of
Information and Communication, South Korea. Federico Morchio, Minister,
Argentina. Soedradjad Djiwandono, State Minister of Trade, Republic of
Another 11 students have had various functions in Ministries and Offices of
the Governments of their countries:
Raul Saez, Chile; Humberto Sarmiento, Mexico; Waqar Masood Khan, Pakistan;
Aqdas Ali Kazmi; Pakistan; Kazi Mutawakkil, Pakistan; Rahul Khular; India;
Satia Narayana Dash, India; Jonas Kipokola, Tanzania; Aniceto Weber, Brasil;
Taufiq Ali, Bangladesh; Saadat Hussain Bangladesh;
10 students had or still have important positions in State Banks of their
countries, 20 have had various positions in the World Bank, 6 in IMF, 5 in
IADB, 34 have been professors at US universities and another 30 at the
universities elsewhere in the world.
In addition to that some top world economists were familiar with my
publications and activities. I learned about that either from private
discussions with them, public discussions at various meetings or from their
publications. Among them were especially Milton Friedman, Paul Samuelson,
Abba Lerner, Evsey Domar, Tjaling Koopmans, Samuel Kuznets, Alexander
Gerschenkron, Alvin Hansen, Wassily Leontief, Leonid Kantorovich, J. R.
Hicks, Zvi Griliches, Ludwig von Mises, Jan Tinbergen, Ronald Coase, Leif
Johansen, Michio Morishima, Francis Seton, Peter Wiles, Alec Nove, Ljubo
Sirc, Roy Harrod, Robert Sollow, Barbara Sollow, and many others.
I am mentioning all that just to demonstrate, that my publications and
activities were reasonably well known all around the world and therefore the
fact that Cockshott, Cotrrell and Dieterich knew nothing about it and
wrongly attributed to me the positive attitude towards Marxist theory of
value and physical planning without the market does not testify well about
their research abilities.
In the rest of this paper I will document that my above claims are true and
will also attempt to prove that the claimed economic features of the "New
Socialism of the 21st Century" are inconsistent and that such an economy
cannot work. For this purpose I will use extensive quotations from my
publications as well as quotations of others about my views and activities.
Let us start with mentioned price calculations. Together with my colleagues
Lubos Hejl and Bohuslav Sekerka I was working during 1960's on the research
project that involved mathematical formulation and empirical calculation of
various types of prices that were at that time proposed and discussed in the
Soviet Union and Eastern Europe.
The concern about the choice of appropriate price formula for planning of
prices resulted from the fact that the ad hoc price fixing by central
governments had incredibly bad effects on the economies in Eastern Europe.
Here is the quote from my paper " THE ROLE OF PRICES IN A SOCIALIST ECONOMY
" presented at the Conference of International Economic Association" in
Plovdiv Bulgaria December 1964, and published in M. C. KASER(ed.): ECONOMIC
               "In fact, there was no planning of prices, for they remained
constant until glaringly proved incompatible with evolving economic
conditions; sets of such prices were more random in their relative values
than those formed on the market, for they were a compound of errors in
computations, false appraisals of the situation, and lack of information and
subjective criteria on the part of decision-makers....
               An excessive centralization rendered a flexible price policy
impracticable, for frequent adjustments of prices would have required a vast
increase in the quantity of information processed at the center... But
information on changes of demand was not available.....
               Among the results of the price system must first be counted
disequilibrium on the market both in volume and structure of the supply and
demand for consumers' goods. The producer is interested above all in the
fulfillment of planned indicators and not directly in the production of
commodities demanded by the consumer...
               Distorted price relations in retail trade induced an
irrational structure of consumption: an excessively low price may waste raw
material and labor - in extreme cases it has been known for a consumer to
buy a finished product solely to extract its raw material.....
               Excessive centralism overloaded the administrative apparatus
and created favorable conditions for the growth of bureaucratic
In the book "Economic Devolution in Eastern Europe"
nd_Econ/prices/prices_sirc.htm> )
 Ljubo Sirc writes (p.52):
                "In Florence, Professor A.J. Pashkov of the Soviet Academy
of Sciences was trying to explain the pricing system in his country by
defining the price as a measure of labor' and then telling the conference
that, at present , 45 per cent of all Soviet prices are fixed by authorities
of the constituent republics and not by central authorities. But this
explanation did not satisfy the Czech participant, Oldrich Kyn, who wanted
to know by what methods exactly the prices of millions of products are being
established either by central or republican authorities. "

And here is what I said there:


               I should like to demonstrate the experience of
Czechoslovakia what problems are connected with centralized price setting of
all prices. Let us suppose we have 2 to 3 million individual commodities
which must have their prices set. We can follow the traditional method by
which price reforms were carried out in the past or the more modern method
making use of computers. This new method is being used in the present price
reform taking place in Czechoslovakia.

               In the past price reforms took place approximately every
five years. The calculation of new prices took about three to four years and
thus practically filled out the entire period between the reforms. The
traditional method of calculation was roughly as follows: first the prices
of primary products such as coal, iron ore, etc. were calculated. On their
basis the prices of derived products such as electricity, steel etc. were
calculated and on their basis in turn, the prices of further commodities,
such as machine-tools etc. The process of price calculation took place in
successive stages up to the calculation of prices of the final products.
This seems quite rational, but the problem is in feed-backs. As everyone
knows, there exist in the national economy a great number of complex
feed-backs. For instance the production of coal, electricity, etc. requires
the use of the products of the machine-building industry. Therefore the
correct price for coa1, iron ore etc. Cannot be calculated without knowing
the price of machines. Since the traditional method could not take these
feed-backs into account, price thus calculated cannot be considered as real
production price. To achieve more correct prices it would be necessary to
repeat the calculation several times, i.e. to do several iterations. But
each iteration means a new calculation for two to three, millions products.
Even if each iteration takes only two years and five or six iterations were
sufficient for finding correct prices, the whole process would take too
long. We have therefore come to conclusion that such a method is not
adequate for the calculation of real production prices. Our experience has
also taught us that after each general reform of prices, the results were
quite out-of-date because in the meantime conditions had changed, and under
new conditions, they were not real production prices any more.

               The second method of computing prices, that is the one using
electronic computers takes less time, but it is impossible to prepare a
program for a computer, which would compute two to three millions prices.
With the use of electronic computers we must reduce the number of
commodities for which prices are computed. According to our experience with
the help of computers the duration of price reform can be shortened from two
or four years to half a year or one year. But we obtain only average price
indices for aggregate groups of commodities

               So neither does this method give us real and exact
production prices for individual commodities. Our experience thus tells us
that none of the known methods makes it possible to calculate individual
prices exactly and sufficiently fast."

Going back to Kyn - Hejl - Sekerka research project of early 60's it did
involve experimental computer calculations of the labor-value prices, but
also the so called 'cost prices', 'prices of production', 'income prices'
and the sets of two channel and three channel prices. One of the purposes
was to compare these theoretical types to actual prices that were created by
government price fixing. These computations were based on the Input-Output
tables alternatively with 48 and 90 sectors and therefore did not -- and
were not intended to -- prove the feasibility of calculations of labor
values for millions of individual products and even less the desirability of
using them as a tool of central planning in the Socialist economy. Actually,
one of the results of our research was the demonstration that the
labor-value prices recommended by some orthodox Marxists were not
appropriate at all.
The much larger task of calculating 25 000 prices was not any more part of
our research project but was used by the Central Planning Office for the
reform of wholesale prices in 1967. However, the price formula used in the
price reform calculation was a special kind o two-channel prices and not
labor-value prices. Clearly those 25 000 calculated "prices", were just
average price indexes of the relatively large groups of individual products.
Because computers were still not powerful enough at that time only six
iterations could have been made and the results were far from being perfect.
Because of that and also because of the distortion of data provided by
firms the calculated prices were not sufficiently close to the market
equilibrium and the whole price reform was considered a failure.
Here is another quote from my above mentioned paper "THE ROLE OF PRICES IN A
The group of Czechoslovak economists of whom the author is one postulates
the need for reform firstly by rejecting the assumption that planning is
incompatible with the price mechanism, and that socialism permits the
central regulation of production without recourse to the market mechanism.
This leads them to contend that central management is self-defeating, since
the information needed to eliminate all uncertainty in decision-making
becomes too costly and unwieldy. Any restriction of the amount of
information transmitted to the center increases the uncertainty of the
decision-making and hence the risk of adopting wrong decisions; the
absorption of a considerable part of the labour force in administrative
service decreases overall efficiency. They therefore suggest that a market
mechanism automates in a coordinated manner a large part of these decisions;
in addition, the producer is stimulated to satisfy the demands of the
consumer. A market is thus prima facie desirable for the functioning of a
socialist economic system. This, however assumes that prices be freely
formed on the market and not set up by fiat....

Also I have myself made statements at several occasions - some of which
appeared in various publications - that the centrally administered price
reform was supposed to be the last case of fixing of all prices by the
government in Czechoslovakia before making the prices again free on the
 In "Problems and Prospects of Czechoslovakia's New Economic Model." By
Harry G. Shaffer (Published in Jan S. Prybyla: "Comparative Economic
Systems" ) on page 339 is the following footnote 34.
               "Freely fluctuating market prices have, unfortunately, not
been introduced yet," remarked Dr. Kyn to me. "Let us hope," he went on,
"that the price reform in 1968 will be the last step in dictating prices
from above."
The transition to the market economy was the most important feature of the
Czechoslovak economic reform of the second half of 1960's that lead to the
well-known Prague Spring of 1968 and then unfortunately to the Soviet
invasion that terminated it. The reason for the mentioned last central price
reform was to eliminate the main price distortions so that the freeing of
prices would not cause uncontrollable hyperinflation.
Jaroslav Krejci in his article "Measurement of Aggregate Efficiency in the
Czechoslovak Economy" ( Soviet Studies, Vol. 26, No. 4, Oct., 1974, pp.

                "The quest for a 'rational price formula' pursued by
Czechoslovak economists in the late sixties led to alternative
recalculations of prices for individual branches of production which in
turn showed the magnitude of 'economic irrationality' of the existing price
               "For the English papers on this topic see. L. Hejl, O. Kyn,
B. Sekerka, "Price Calculations", Czechoslovak Economic Papers 1967, no. 8;
and O. Kyn, B. Sekerka, L. Hejl, "A Model for the Planning of Prices" in
"Socialism, Capitalism and Economic Growth" (Cambridge 1967)
This was also mentioned by Abram Bergson in his Review of "Socialism,
Capitalism and Economic Growth. Edited by C. H. Feinstein, New York and
London: Cambridge University Press 1967. The Bergson's review was published
in the Journal of Economic Literature, Vol. 7, No. 1 (Mar., 1969) pp. 87-88:
                "Other contributors on planning include the young Czech
economist O. Kyn, who together with two collaborators explains a technique
of price formation, based on input-output analysis, that has been applied in
the Czech reform, and which is apparently intended to improve on a system of
prices which "became so deformed that it almost ceases to fulfill any
rational economic function."
As it was mentioned already above, the theory of labor-value has serious
problems that became quite clearly visible during our price calculations.
This is best described in our final publication in this area, namely the
book "Model cenovych typu" (The model of price types) that was published in
1969, but because this book was not translated to English, I cannot use here
direct quotations.
The first serious problem is that not all kinds of labor are supposed to
generate the same amount of "value" in one unit of time. Some kinds of labor
are more complex than others and according to the theory they produce more
value in the same time interval. Hypothetically, if you would order all
types of labor according their complexity, you would get quite an extensive
scale. There are no statistical data about the labor complexity and even
worse, they can be hardly obtained, because it is not clear what properties
of labor are supposed to produce more and how much more value. There were
some attempts in past to create coefficients of complexity on the basis of
the energy spent in work, but clearly that makes no sense. Smith assumed
that it is competition in the market that generates spontaneously such
coefficients. But without the free market it would be impossible to know
them and therefore it would be impossible to obtain labor values by

Adam Smith Wealth of Nations Chapter 5.
               But though labour be the real measure of the exchangeable
value of all commodities, it is not that by which their value is commonly
estimated. It is of difficult to ascertain the proportion between two
different quantities of labor. The time spent in two different sorts of work
will not always alone determine this proportion. The different degrees of
hardship endured, and of ingenuity exercised, must likewise be taken into
account. There may be more labor in an hour's hard work than in two hours'
easy business ... It is more natural, therefore, to estimate its
exchangeable value by the quantity of some other commodity than by that of
the labor which it can purchase. In exchanging, indeed, the different
productions of different sorts of labor for one another, some allowance is
commonly made for both. It is adjusted, however, not by any accurate
measure, but by the higgling and bargaining of the market, ..."

 Somebody may suggest creation of coefficients of complexity according some
characteristics that labor process of the specific kind must have. But that
would be arbitrary and still it would complicate the value calculations
The problem is complicated further, by the theory assumption, that only the
so called "productive" labor generates value and that many types of labor
are in fact "non-productive". In times of Adam Smith and to some degree even
of Karl Marx it may have seemed logical to define "productive" labor as the
kind involving manual operations in the process of creating the physical
products. The activity in trade, for example was assumed to be
"non-productive", because no creation of new material products was involved.
Similarly any work of accountants and managers etc. was "non-productive"
because they were just thinking, reading, writing or talking and no manual
labor in the process of creating products was involved. What about today? Is
the sitting at the computer that controls the automatically operating
machines that create the physical products productive or not? And what about
producing computer programs, is it "productive" activity? Even more
importantly the classical labor theory of value is based on the assumption
that economics is a zero sum game that is the total value created at certain
interval of time is given by the quantity of labor done by "productively
working" population and if some "non-productive" people get piece of it then
those who produced it must have gotten less by exactly the same amount. But
the modern economics regard that as faulty, because the so called
"non-productive" activities may in fact generate the additional value that
nobody else is deprived of. Consider the following extreme example: certain
essential consumer good is produced by farmers at one place in the country
only. If it were not transported also to other places the local population
would buy and consume only limited amount of it. So the trade activities
that make this product available also to people elsewhere, add the value to
the produced goods. In this sense the trade is also "productive". Similarly
any information processing and decision-making activities would have been
regarded as "nonproductive" by the classical labor theory of value. It seems
to me, that it is more reasonable to consider improved information and
positive decisions as creating additional value and not just as "steeling"
from the so called "productive" workers.
 There is another significant problem with the classical labor-theory o
value. According to Adam Smith and especially also according to Karl Marx
the labor or more precisely the "labor power" (the ability to work) in the
market economy is also a traded commodity. So labor power is supposed to
have its own labor-value as well. How is this labor-value of the labor power
determined? By the classical labor-value theory labor -value of the labor
power is the quantity of labor that is needed to "reproduce" the ability of
the worker to work. In other words to determine the labor-value of the labor
power means to sum up the labor content of consumer goods needed to maintain
the labor ability of workers and their immediate families (because it is
necessary also to guarantee the availability of labor in future) and of all
other absolutely necessary living expenses - as for example maintenance of
their home - that guarantee the reproduction of the availability to work.
Because the price of labor power is wage, the theory claims that under ideal
conditions the wage is determined by the labor-value of the labor power. As
a result the total value produced by the worker during one unit of time
splits into two parts: 1) the so called "necessary labor", which is the
amount of labor the worker gets back through the wage, and 2) the so called
"super-value", which is the amount of labor appropriated by workers
employer. The ratio of the "super-value" to the value of labor power is the
so called rate of super-value that under capitalism is supposed to express
the rate of exploitation. It is assumed that the rate of "super-value" is
the same in all branches of the economy.
But suppose that we are considering two kinds of labor: the first one of the
complexity A and the second one of the complexity B. As mentioned above they
are producing different quantities of labor-value per unit of time. Unless
the proportions of the value produced by the unit of labor A to that
produced by the unit of labor B is the same as the ratio of the "labor value
" of the "labor-power" A to the "labor value" of the "labor-power" B, the
rate of "super-value" for the types of labor A and B cannot be the same. It
is illogical to assume that the complexity of labor is determined by the
cost of reproducing labor-power and the labor theory of value is therefore
inconsistent. If you really believe in the labor theory of value try to
solve this paradox. Otherwise just give up and admit that the labor-theory
of value is wrong. The implication of it would be that both the "New
Socialism" and the "Socialism of the 21st century" are based on the
incredible stupidity of their authors.
The price calculations were only a minor part of my overall activities in
1960's. Those activities included also teaching economics at Charles
University in Prague, research and publications in the fields 1) History of
Economic Thoughts and specifically about non-Marxian economics, 2) Economic
Cybernetics, 3) Mathematical Economics and 4) Econometrics. I have also
written some lecture notes and chapters in several economic textbooks. In
addition to that I have given lectures and participated in conferences,
seminars and discussions at various places in Czechoslovakia and abroad. For
several years I have worked part-time as the consultant in the Government
Office for Prices. Finally I have participated actively in the preparation
and implementation of the blueprint for the economic reform. Specifically I
was in charge of the section on Price Policies.
In all those activities I contributed to the criticism of the Marxian
economics and specifically of the labor-theory of value. I tried also to
provide information about important non-Marxian economic theories that were
virtually unknown in Czechoslovakia at that time. I have never believed that
modern industrial economy can function efficiently without the market
mechanism. I was among the first few Czechoslovak economists who in the
early sixties started to criticize openly the Soviet-type administrative
central planning and argued for the return to the market economy. Of
course, at that time Czechoslovakia was still ruled by the Communist party,
and censorship of all publications was very thorough, so it was not possible
to suggest directly the return to Capitalism. Instead we have argued for
creation of the "Market Socialism" and as the idea of the market reform
began to be accepted, we started to argue at least for privatization of the
small scale enterprises. I am almost sure that if the Czechoslovak reform
process were not interrupted by the Soviet military invasion, the process
would lead also to the privatization of the middle scale and eventually
maybe also of the large scale enterprises.
After the Soviet invasion in the fall of 1968 I emigrated from
Czechoslovakia and spent 3 years as the visiting research economist at
Berkeley and then from 1971 until my retirement I had been teaching at
Boston University, where I am still listed as emeritus professor of
economics. During my stay in the USA I have continued in my activities.
I had several hundred graduate students which among other things usually
learned also about my experiences in Czechoslovakia including criticism of
Marxian economics and the Soviet-type system of command planning. I should
also mention that during my stay at Boston University, our Economics
Department has improved considerably and in the recent years its rankings
has reached positions usually between 10th and 25th place in the world. Many
of our students have in the years after their graduation reached important
positions in governments or central banks of their countries, in private
organizations and firms, in international banks and organizations, or as
professors at universities all over the world.
In the USA I gave lectures, presented papers or participated in discussions
at many universities, research institutes, seminars and conferences. I have
been also involved in research, consulting and/or lecturing in many
countries of Europe and Asia. At these occasions I frequently got in contact
with leading economists, so that they were also aware of my activities and
All the above mentioned facts were brought here to show, that my positions
and activities were already for quite a long time known to many economists
around the world. It is, therefore, unbelievable, that Cockshott and
Cottrell as well as Dieterich knew nothing about that and that Dieterich is
completely inappropriately assigning me the important role in his image of
the "Socialism of the 21st Century".
Some evidence that what I have just said is actually true will be documented
in the following parts of this paper.

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