The economic calculation debate
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Dan Greenwood, late of this parish, asked me to forward this to. You can access the full thing by cliking on “PDF” in the top right, if that’s not obvious. Hope it is of interest.
Socialism won’t be about making the “most economic methods for producing goods and services” since productive decisions won’t be made by reducing things to a single metric. This stuff is actually besides the point.
Do these guys say anything in answer to what could be called the “structural domination problem” of capitalism? Or do they not even accept it as a problem?
Bit of a disappointing (and rather predictable) article, really…. Doesn’t really go much beyond the stale old limited choice of the market versus central planning (both of which we can reject) and doesn’t really question what is meant by “demand” or even “economising of resources”(the so-called “least-cost combination” of resources is not a reliable guide in that respect). The only thing that is slightly interesting is Dapprich´s “socialist tokens as an alternative to money”. Not quite sure what he has in mind but it ain’t labour vouchers apparently…
Robbo is right. The article by Dapprich on tokens as an alternative to money is much more interesting.
In it he starts from what Marx wrote in his Critique of the Gotha Programme where Marx discusses (I would say rather than proposes) non-circulating tokens based on labour-time as the alternative to money in socialism/communism pending the development of the productive forces to the point where people can have free access according to self-determined need.
He proposes a different type non-circulating tokens and a different way of “pricing” the goods they can be used to redeem. That basically is his alternative to money.
He accepts that, as far as the production of producer goods is concerned, Marx and Engels “proposed some kind of in-kind planning. The constraints, benefits and costs of production are to be evaluated in purely physical terms.”
His concern is the distribution of consumer goods and services in a socialist/communist society and here he makes some criticism of Marx’s token system. He thinks that his own version obviates the need to go over to full free access as it would ensure that people’s needs are satisfied. In other words, that a system of non-circulating tokens should be a permanent feature of socialism/communism.
He even mentions the argument (which we have used) that “since we have seen significant increases in productive capacities since the nineteenth century, during which Marx was writing, perhaps the token system is already outdated”, even though he says he is not convinced by it.
Clearly he is somebody arguing from the same basis as us and so much more interesting to discuss with than dealing with the latest offerings of so-called “Austrian scholarship” that his article with Dan does.
I think this link will take you there:
https://ideas.repec.org/a/spr/revepe/v4y2023i3d10.1007_s43253-022-00091-6.html
Off-topic:
If @stuartw2020 is still in contact with DF, pass on the message that I finally got around to listening to his Dostoyevsky talk last year and really enjoyed it. Cheers.
Am I the only person who finds it amazing that Von Mises’ argument is even consider worthy of debate (I know it still has a high profile in the US).
Von Mises argued that in the capitalist mode of production, the law of value, money, financial prices and the impact of capital goods and private ownership of the means of production is more efficient and productive than a system of production based upon common ownership.
The reality of this mythical system is somewhat different.
Me and my mates buried a friend of more than 50 years yesterday. He died because the Company he worked for, from the age of 16, thought it was more efficient and productive for welders not to have proper masks, and that that the cost of effective safety equipment would reduce their levels of profit and make him as a worker “inefficient”.
Prior to his early death he spent 10 years using an oxygen cylinder to breathe.
The company he worked for have, predictably, gone bust. The insurance companies who covered the company have also gone into hiding. They have accumulate their capital, distributed their dividends, and they and the share holders have fucked off and are never to be seen again, or to hold any kind of liability. Very efficient.
I’m sure his family will love to hear the modern day Von Mises and his devotees explaining how it is that capitalist production is the only efficient and effective way of producing the things we need to live and that the only measure of that efficiency is price, the price of lives.
Even if, in a socialist society, we produce too many cigars and cigarettes (to use Von Mises example), even if we end up with stores of things that we do not require, so what? It will be a scratch on the surface of the inefficiencies of capitalism.
Inefficiencies? What about all of those futile years of labour spent in the banking industry, brokerage, buying and selling. All of the buildings used as cathedrals to the exchange and sales system (banks, building societies, etc.). All of those wasted lives spent as administrators of capitalism (invoice clerks, account managers, wages staff, insurance arrangers, stock brokers, etc. etc.).
And all of this is before you even start to look at the massive waste of the armaments industry, the killing machines of the state, the environmental degradation of the planet.
If a socialist society ends up producing a few too many school uniforms, a few thousand left handed screw drivers that aren’t used and a few too many tins of tartan paint taht sit on the shelf, I’m pretty sure we could be easily be forgiven. Esspecially if fewer welders die in the process.
Rest easy Geordie, your marras miss you, keep a’had!
Have just got round to reading Dan’s article, and I find it hard to fathom how a fair-minded socialist reader could fail to find material of interest. There’s no accounting for taste I suppose. Or is there?
Why would it be interesting? I couldn’t see anything new in it and, like the old calculation arguments, it misses the mark about what socialism is (the proponents of ‘cybernetic socialism’ do this too).
It’s true that socialism wouldn’t always end up making the “most economical” production choices, but so what? There are other considerations to be taken into account – for example the quality of the life of the people making the stuff, the environmental impact of the goods produced etc.
You could have a perfectly “economic” allocation of production goods, yet everyone’s life would still be a misery and the planet heading to an uninhabitable hell.
Please correct me if I am missing anything.
The paper tangentially references an article by Tom O’Shea – I suggest you read that instead.
The authors seem to have been overly influenced by Cockshott and Cottrell´s so-called “cyber socialist” approach. The latter advocate central planning and consider the Soviet Union to have been basically “socialist” but not sufficiently democratic and also lacking, at that time, in the computer technology that could have made central planning a success – allegedly.
This bit from their article is revealing:
“Fully resolving the demand side calculation problem requires a mechanism which ensures that the consumer valuations captured by token prices will also be reflected in production targets. For this purpose, Cockshott and Cottrell (1993) proposed a double control loop through which the plan target is continually adapted to consumer demand. In the first control loop, the token prices of final goods are continuously adjusted to approximate the market clearing rates at which demand matches supply as described above. Should demand for a good exceed its supply, its price must be increased. Should demand be below supply, the price must be reduced. In the next step, the approximated market clearing rates of each are compared to the cost of producing it. Cockshott and Cottrell (1993) use labor values as a measure of cost, while Dapprich (2022)uses shadow prices instead.”
This is a world away from anything we would recognise as being socialism tbh….
There is also this curious passage in the article.
“We highlight the potential for such an immanent critique, explaining how, in light of technological advancements, planning processes might be capable of fulfilling the same kind of epistemological functions that markets fulfil.”
What are these supposed “epistemological functions” that markets are supposed to fulfil? Markets don’t tell us much about human needs or production costs, for that matter (think of the problem of externalities)
So no – sadly there was not much in the article that one could sink one´s teeth into. It did not say anything new. Perhaps a future article might be more interesting if it shifted the focus away from a system where you have a single universal unit of account (necessary only in a society based on a market exchange) to a system involving calculation in kind and where the only purpose of production is to directly meet human needs. In other words, socialism as we would define it
Like I said, seems to me these discussions about calculation are just besides the point. If you want to talk about the possibility or impossibility of socialism you have to be talking about the possibility or impossibility of free and co-operative self-government.
‘Das Kapital’ isn’t a book about the effective ‘economic’ allocation of goods. It’s a book about domination, about how people end up being controlled and dominated by the imperatives of the market.
Dan says he will respond next week when he finds time so I’m going to post a question for him here.
The managers or the democratically elected committee or whatever or whoever it is that is in charge of a productive unit in a planned economy must make decisions about how much of what to make, in what quantity, with what materials, and so on. If the goal is to hit targets or measures of some kind, whether set centrally or gathered from dispersed data, then we can expect them to do that, but with consequences that follow Goodhart’s law. The famous, oft-cited example is in the Soviet Union, where a demand from the centre that factories produce a greater tonnage of nails, say, would lead to the production of heavier but completely useless nails. We can expect all kinds of things from production for use, in the other words, except that the result will be useful things (when we’re talking about industrial-scale production anyway).
The manager or board of a productive unit in a market economy, or an entrepreneur seeking to do better than existing production units or to create something new, on the other hand, and tasked with increasing profit, must discover in some way just what it is customers want, and what they are prepared to pay for that thing or service they want in comparison with other things they want, and provide it at less cost than it takes to make, etc, and have very clear and strong incentives to do this or lose their shirt. This seems like a very straightforward and simple task to everyone apart from those who ever try it. But however hard or straightforward, the process is guided at every step of the way by market prices. Without them the task is not hard but impossible (at least if we care that we have a factory full to the brim with useless tartan paint while the fertiliser factory down the road goes without key raw materials).
My question, at last, is this: how does replacing the manager or the committee or the central planning board with a calculator, even a very whizzy and complicated calculator, even a calculator that does a very good impression of being able to have a chat with you, change any of this?
If your paper answers this question, apologies. I did read it but in a hurry. I will give it closer attention when time permits, hopefully next week!
Thanks Dan, look forward to your reply
As anyone who has dealt with a standard procurement contract under capitalism will tell you, the specifications run to way more than cost: if you need 5mm steel nails with teflon coating, that’s what you state. As you say, with the Soviet (I think it was actually steel plates) target by weight it was an arbitrary measurable target set from the centre. But when the customer tells you what they want, and your target is to satisfy measured customer demand (or negotiate to alter their demand based on what is easier for you to produce, could you make do with 6mm nails?).
Kantorovich’s linear equations do allow to make rational decisions between productive units to match required outputs: in his version, these outputs would be set by a central plan, but there is no reason why they could not also work for matching real expressed demand. If need be, per Dworkins cited in Dapprich, adjusted winner auctions are a useful functional way of expressing real desire/need (there is an issue, but not insurmountable of who needs to bid). Lloyd Shapley’s stable matching algorithms are also a useful method, both are rational ways of dealing with measuring demand that do not require commodity exchange. Even Dapprich’s tokens are fine: Kantorovich linear algebra to match real token demand would be functional.
As some writers have pointed out, Amazon is leading the way with this, and the reality is that you don’t need to hit optimal efficiency, but tend toward it.
Per Bijou Drains above: in reality, efficiency doesn’t matter as long as the targets, the outcomes are rational and they are met: socialism would not be a labour sparing system, and in the final analysis, that’s the nub of Mises’ complaint, that socialism isn’t capitalism.
Why can’t those in direct charge of a productive unit in a socialist society decide how much to produce in the light of how much people take (or don’t take) from distribution centres or other outlets in much the same sort of way as managers of capitalist enterprises do today to sales? If stocks fall below average that’s a signal to produce more; if stocks built up that’s a signal to produce less. They will be responding to real demand as opposed to artificially limited, paying demand. But there is no difference in principle.
I don’t know about Dan but Dapprich creates a problem for himself because he insists on giving people in a socialist society non-circulating tokens with which to acquire consumer goods and services, at least those not provided for free. This means he has to fix a “price” for these and so gets drawn down that rabbit hole. He suggests this should be the “clearing price”, ie the price that will clear what has been produced rather than the other ways that those already down there have proposed.
The other objection to any token system as an alternative to money is the unnecessary use of resources to manage it, maybe not as much as the money system but still a considerable amount.
“Without them the task is not hard but impossible (at least if we care that we have a factory full to the brim with useless tartan paint while the fertiliser factory down the road goes without key raw materials)”
It’s a good job the capitalist system of production doesn’t lead to mass shortages of key materials such as food, housing, power, clean water, etc.
I’m pretty sure the goods discussed in the article below will be available in tartan, ironically
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