Socialism: Markets, central plans, or what?


[This is the eleventh essay in a multipart series addressing the surge in interest in and support for Socialism, what the surge means, what it seeks or will seek, where it might extend, and how it might unfold.]

In economies stuff is produced and stuff is consumed. How much and by whom? Workplaces produce this or that. What and how much? We all have incomes. How much can any particular income purchase of any particular item? How does what people want to have match up with what workers want to produce?

Allocation is about how economic actors collectively establish relative worths, how workers settle on what and how much to produce, and how consumers settle as individuals and in groups on what they want to have from the social product. Allocation typically occurs by way of markets or central planning or a combination of the two. But can we combine either markets or central planning or a combination of the two with equitable remuneration, self managing workers and consumers councils, and balanced job complexes to complete the key elements of our preferred socialism?

Central planning was the choice of many self-titled “socialist” (but really coordinator) economies. Central planning is also, with only modest differences, used within massive production units like Boeing and General Motors to allocate diverse products and tens of thousands of workers among many venues.

In central planning, a planning agency seeks and assesses information from workers and consumers and proposes inputs and outputs for all economic units. The units consider their instructions and either carry them out or register problems they think will arise in doing so. The central planners assess the predicted problems and the cycle repeats arriving at its conclusion when the planners no longer seek responses. The process is down go questions (seeking information), up go answers; down go instructions, up go concerns/problems; down go instructions, up goes obedience. In practice there are more details, but nothing that fundamentally alters the logic. 

As central planning has been a key component of most post capitalist economies, it has been subject to relentless criticism by advocates of capitalism, which criticism, however, has for the most part been ill conceived. Mainstream economists claim central planning can’t work. There is too much information, the incentives are screwed up, and so on. Three things were odd about this. First, during a few decades of operations at least according to the critical mainstream economists’ criteria, Soviet central planning worked rather well. Indeed comparing the Soviet Union to countries with comparable development from its inception over the next five decades, for example comparing the USSR and Brazil, the Soviet outcomes were superior in output, development, and many other indices. Second, as noted above, huge U.S. firms, in many cases economically comparable or larger than small countries, have used central planning to internally allocate their workforces among their units for decades, and, again, at least by mainstream calculus have done quite nicely. And third, in technical journals, not popular accounts, mainstream economists acknowledge the workability of central planning. That a massive public lie – central planning can’t  allocate without disastrous results – could be told and sustained shouldn’t be overly surprising. Consider the lie that workers can’t do empowering work, or the lie that owners are highly productive and need to receive profits for anyone beneath to benefit – and so on.

But, if central planning can get things produced and distributed, why not use it for our preferred economy?

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