Socialist Calculation and Market Socialism

Jael, Paul (2015): Socialist Calculation and Market Socialism.

Abstract

This paper focuses on the debate held in the twenties and thirties of the last century between libertarian economists and socialist economists, following the denial by the first ones of the feasibility of a socialist economy. This controversy is well known to specialists and has been widely commented. It seemed to me useful to initiate non-specialists in an original way: by having the controversy speaking by itself. We review the main contributions and summarise their arguments with, initially, the bare minimum of personal comments.

Walrasian general equilibrium serves as a reference for the defenders of market socialism in the controversy. But the concept of competition behind this theory is very incomplete; it is purely passive. It follows that the market socialism which emanates from it is not really a MARKET socialism. It is lacking the competition which innovates. Markets for capital goods are also lacking in theses models.

Our paper then turns to a new generation of socialist models involving this real competition. We review two models proposed by Bardhan and Roemer and then exhibit a personal model. This type of model is facing a modern criticism whose central concept is the "soft budget constraint".

• Item Type: MPRA Paper
• Language: English
• Keywords: planning; market socialism; socialist calculation; soft budget constraint; Barone; von Mises; Hayek; Lange; Roemer
• Subjects: P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P20 - General; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P21 - Planning, Coordination, and Reform; P - Economic Systems > P2 - Socialist Systems and Transitional Economies > P27 - Performance and Prospects

References

Auerbach, P. and D. Sotiropoulos (2012) "Revisiting the Socialist Calculation Debate: the Role of Markets and Finance in Hayek's Response to Lange's Challenge" Kingston University London, Economics Discussion Paper 2012-6. http://eprints.kingston.ac.uk/23463/1/Auerbach-P-23463.pdf

Bardhan, P. and J.E. Roemer (1992) "Market Socialism: a Case for Rejuvenation" Journal of Economic Perspectives 6(3), 101-116

Bardhan, P. and J.E. Roemer (1994) "On the Workability of Market Socialism" Journal of Economic Perspectives 8(2), 177-181

Barone, E. ([1908] 2009) "The Ministry of Production in the Collectivist state" in F.A. Hayek (Ed) Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, The Ludwig von Mises Institute Auburn Alabama. https://mises.org/sites/default/files/Collectivist%20Economic%20Planning_2.pdf

Bergson, A. (1967) "Market Socialism Revisited" The Journal of political Economy 75(5), 655-673

Bradley, M.E. and M. Mosta (2010) Enrico Barone's "Ministry of Production": Content and Context http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1734325

Cassel, G. (1929) Traité d'économie politique, Marcel Giard, Paris

Dickinson, H.D. (1933) "Price Formation in a Socialist Community" The Economic Journal 43 (170) June 1933, 237-250

Dobb, M. (1935) "Economic Theory and Socialist Economy: A Reply" The Review of Economic Studies 2(2) (Feb 1935), 144-151

Greenwood, R. and D. Scharfstein (2012) The Growth of Modern Finance www.people.hbs.edu/dscharfstein/growth_of_modern_finance.pdf

Hayek, F.A. ([1935] 2009a) "The Nature and History of the Problem" in F.A. Hayek (Ed) Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, The Ludwig von Mises Institute Auburn Alabama. https://mises.org/sites/default/files/Collectivist%20Economic%20Planning_2.pdf

Hayek, F.A. ([1935] 2009b) "The Present state of the Debate" in F.A. Hayek (Ed) Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, The Ludwig von Mises Institute Auburn Alabama. https://mises.org/sites/default/files/Collectivist%20Economic%20Planning_2.pdf

Hayek, F.A. (1948) Individualism and Economic Order, The University of Chicago Press

Kornai, J. (1986) "The Soft Budget Constraint" Kyklos, vol. 39- fasc. 1, 3-30

Lange, O. (1936a) "On the Economic Theory of Socialism: Part One" The Review of Economic Studies 4(1) (Oct 1936), 53-71

Lange, O. ([1936] 1973) "Mr Lerner's Note on Socialist Economics" in Readings in Welfare Economics, M.J. Farrell (Ed) Macmillan London

Lange, O. (1937) "On the Economic Theory of Socialism: Part Two" The Review of Economic Studies 4(2) (Feb 1937), 123-142

Lange, O. (1967) "The Computer and the Market" in Feinstein C. (Ed): Socialism, Capitalism and Economic Growth: essays Presented to Maurice Dobb, Cambridge University Press

Lavoie, Don (1981) “A Critique of the Standard Account of the Socialist Calculation Debate” in The Journal of Libertarian Studies Vol. V n°1 (Winter 1981)

Lerner, A. (1934) "Economic Theory and Socialist Economy" The Review of Economics Studies 2(1) (Oct 1934), 51-61

Lerner, A. ([1936] 1973) "Some Notes on Socialist Economics" in Readings in Welfare Economics, M.J. Farrell (Ed) Macmillan London

Lerner, A. (1937) "Statics and Dynamics in Socialist Economics" The Economic Journal 47 (186) (June 1937), 253-270

Lerner, A. ([1944] 1946) The Economics of Control, Macmillan New York

Mandel, E. (1962) Traité d'économie marxiste, Julliard Paris (coll. 10-18)

Mises (von), L. (2002) Selected Writings of Ludwig von Mises; Vol. 2. Edited by Richard Ebeling. Liberty Fund Indianapolis. 2002. http://oll.libertyfund.org/titles/mises-selected-writings-of-ludwig-von-mises-vol-2-between-the-two-world-wars-monetary-disorder-interventionism-socialism-and-the-great-depression

Mises (von), L. ([1920] 2009) "Economic Calculation in the Socialist Commonwealth" in F.A. Hayek (Ed) Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, The Ludwig von Mises Institute Auburn Alabama. https://mises.org/sites/default/files/Collectivist%20Economic%20Planning_2.pdf

Pareto, V. ([1906] 1927) Manuel d'économie politique, Marcel Giard, Paris

Roemer, J.E. ([1994] 1995) “A Future for Socialism” Theoria 85 (May 1995), 17-46

Roemer, J.E. (1995) "Joseph Stiglitz's Whither Socialism? An anti-Hayekian manifesto," New Left Review 211 (May-June), 112-129

Schumpeter, J. ([1943] 1976) Capitalism, Socialism and Democracy, Routledge, London and New York

Shleifer, A. and R.W. Vishny (1994) "The Politics of Market Socialism" Journal of Economic Perspectives 8(2), 164-176

Taylor, F.M. (1929) "The Guidance of Production in a Socialist state" The American Economic Review 19 (1) (Mar 1929) 1-8

Voslensky, M. (1980) La nomenklatura Belfond Paris

Yunker, J.A. (1995) "Post-Lange Market Socialism: an Evaluation of Profit-Oriented Proposals" From: Journal of Economic Issues, Sep 1995, www.wiu.edu/users/miecon/wiu/Yunker/postlang.htm