I'll add that the book Red Plenty is entertaining and thought provoking and quite fun to read. The historical and cultural scenes depicted are interesting as well however you feel about the case for central planning.
It seems to me, contrary to what is often claimed, the problem of central planned economies (not just state-wide ones, but also company-wide ones) is too much optimization at the expense of robustness.
In top-down planned systems, there is always somebody who says something like "we only need this one thing for everybody". For example, in communist Czechoslovakia, there was only one factory designated to produce certain electronic chips. But then everybody becomes dependent on that one factory, and if that one factory slips in schedule, everything that depends on it will slip.
There is a fundamental trade-off to be made. You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low.
But the planners are often willing to take risk of being less robust for the sake of efficiency, because it usually gives you a free promotion in human status hierarchies.
(If you ever worked in a large company, I am sure you can recognize the above effect, somebody hyper-optimizing through a mandate, and it has 2nd order effects in decrease of efficiency.)
Compare that with market economy, which actually has huge overabundance of production capacity, and multiple producers of almost everything. This is less efficient but works really well in practice. (However, it has the other kind of problem; there is no way the free market can recognize that there is too much companies, without the agony of "malthusian" overcrowding and associated nasty effects such as more stress for everybody. Things like bullshit jobs are probably an end result.)
The inefficiency of market economy is terrible. Also it leads to production of bad products where repairability, quality is sacrificed to reduce costs and increase sells (who would make a good light bulb, which will last years if you can make a bad light bulb which will last months and sell dozens of them). I'm living in post-USSR country and a lot of old consumer goods which were "made in USSR" are an etalon of quality compared to modern goods.
I still think that central planned economy is superior to market economy. USSR failed because of human factor and probably because computers were not good enough to produce proper plan on a USSR-scale, but even with those factors it was able to compete with the rest of the world in science, space, military. It's quite fascinating.
> even with those factors it was able to compete with the rest of the world in science, space, military.
Competing on a few key sectors is easy when you sacrifice the livelihood of your whole nation, spoil their property, and send millions to the Gulag to deter any political opposition.
And the Soviets did not compete in "Science". They competed on military and space exploration mainly, but most of the other areas of Science were left dry by the Soviets, or left to crazy experimentation based on pseudo science in agriculture. Most of the genetic discoveries were done in the US, most of drug development happened in the US, computer development was way ahead in the US as well - there is no world where the Soviets were competitive across the spectrum.
And let's not forget that the US continuously shipped grains to the URSS because they could not produce enough food for their own people consistently. You can't do Science if you can't even grasp agriculture.
> Competing on a few key sectors is easy when you sacrifice the livelihood of your whole nation, spoil their property, and send millions to the Gulag to deter any political opposition.
I doubt it is actually that easy. There wasn't many economies in the world to pull that off. It is probably not a coincidence that most successful countries give its citizens high degrees of personal autonomy.
>Competing on a few key sectors is easy when you sacrifice the livelihood of your whole nation, spoil their property, and send millions to the Gulag to deter any political opposition.
Don't forget that Russia (and thus USSR) started of as a poor agrarian nation to begin with, much behind in industrialization than the US, UK, etc.
The pictures of huge queues aside, USSR was a huge jump in standards of living and consumption for millions of people compared to before (which even included a tradition of serfdom).
USSR had also started quite early with non-central planning (NEP was a "free market" attempt similar to today's China), but ended it to quickly allocate resources between WWI and WWII to being able to withstand invasion. Quite prescient it was too.
I'd say USSR would have done much better without Stalin at the helm, without WWII that had a 30+ million human toll, and with NEP continued (it was stopped sometime in the late 20s).
>And the Soviets did not compete in "Science". They competed on military and space exploration mainly, but most of the other areas of Science were left dry by the Soviets, or left to crazy experimentation based on pseudo science in agriculture.
Maybe invest in some science history books? The "crazy experimentation based on pseudo science in agriculture" (Lysenko I guess) is a known early example (then again the west had its own share or pseudo science, remember lobotomies?), but they had tons of important scientists and engineers in all fields, much beyond "space exploration and military" -- from Kolmogorov to Basov, and tons of inventions we depend upon today...
> Don't forget that Russia (and thus USSR) started of as a poor agrarian nation to begin with, much behind in industrialization than the US, UK, etc.
This is not true. Revolution in Russia was performed by industrial workers, not by agrarians. Also, Russia was third-fourth economy in the world just before war. Other countries in the world were much poorer and agrarian.
You can compare Russia with Japan, or Korea, or Singapore, or China. Apples to apples.
If you look at historical values of GPD, you will see that grown in first world countries (Europe, Russia, the United States, Canada, and Japan) started at about 1850, and they outpaced rest of the world in about 1900. I see no correlation between data and Stalin.
> The pictures of huge queues aside, USSR was a huge jump in standards of living and consumption for millions of people compared to before (which even included a tradition of serfdom).
A huge jump? Versus the tsar regime, probably - it was a catastrophe in itself. But compared to the Western world, GDP growth was miserable and clearly behind all "modern" countries in comparison.
It was, anyway, clearly going to hit a wall economically.
> About Science
Your argument does not refute anything of what I mentioned. The Soviets were behind in most disciplines. And their had clear ideological barriers that prevented them from doing actual Science, in case you forgot:
> Already in 1920s, certain fields of scientific research were labeled "bourgeois" and "idealist" by the Communist Party. All research, including natural sciences, was to be founded on the philosophy of dialectical materialism. Humanities and social sciences were additionally tested for strict accordance with historical materialism.[2]
> After World War II, many scientists were forbidden from cooperation with foreign researchers. The scientific community of the Soviet Union became increasingly closed. In addition to that, the party continued declaring various new theories "pseudo-scientific". Genetics, pedology and psychotechnics were already banned in 1936 by a special decree of the Central Committee. On August 7, 1948, the V.I. Lenin Academy of Agricultural Sciences announced that from that point on Lamarckian inheritance, the theory that personality traits acquired during life are passed on to offspring, would be taught as "the only correct theory". Soviet scientists were forced to redact prior work, and even after this ideology, known as Lysenkoism, was demonstrated to be false, it took many years for criticism of it to become acceptable
There is this thing about soviets is that you can't at the same time fight Truth in all areas of daily life, and at the same time promote the scientific method. It's just not compatible.
> A huge jump? Versus the tsar regime, probably - it was a catastrophe in itself. But compared to the Western world, GDP growth was miserable and clearly behind all "modern" countries in comparison.
I'm curious, how useful is a GDP measurement in a "communist" country where there are no monetary transactions to obtain the most important human needs -- housing, education, daycare, leisure, vacations, etc?
You need to learn more about these countries then. Don't just buy the propaganda.
One of the ways Marxist-Leninism splits from traditional Marxism is Lenin believed (or realized that) a communist state would need to go through a transitionary market period with strong regulations and planning. The USSR never abolished money. That is way way way farther then they managed to get. There were super markets (not great but I Western standards, but they were there). They believed an ideal socialist state would take a long time to achieve.
I’m aware that there were money and shopping in the USSR, thanks. I’m also aware that there was no real estate market in the USSR, daycare and education of all levels was free, vacations weren’t paid for, etc. I’m assuming none of those are in GDP calculations? That was my question.
Very convenient how you left out the last two sentences in the paragraph about Lysenko and Lamarckism:
>After the 1960s, during the Khrushchev Thaw, a policy of liberalization of science was implemented. Lysenkoism was officially renounced in 1963.
Hmm. Almost like you started with your mind made up and went looking for the quickest thing that confirmed it.
Of course, the US didn't engage in any cooky political pseudoscience from the 1930s to 60s. Only the bad guys were backwards 80 years ago right?
> The Tuskegee Study of Untreated Syphilis in the Negro Male, also known as the Tuskegee Syphilis Study or Tuskegee Syphilis Experiment or the United States Public Health Services Study of Untreated Syphilis in Black Males was an infamous, unethical, and malicious clinical study conducted between 1932 and 1972 by the U.S. Public Health Service. The purpose of this study was to observe the natural progression of untreated syphilis in rural African-American men in Alabama under the guise of receiving free health care from the United States government.
Well say, what do you know, it's almost like going back 80 years and finding some old fucked up political shit is an unfair way to prove a country is backwards.
There's some survivorship bias at play here. The crappy, poor quality goods made in the USSR went to the scrap heap decades ago. The stuff you're seeing today lasted the test of time, but a lot of other stuff didn't.
Some Soviet categories of goods, and brands were pretty decent. My grandparents' fridge has lasted a good 40 years, without any issues. Their television was broken more then it was working.
A percentage of this effect is due to "restrictions" on manufacturing. i.e. you had to make things with a certain thickness of steel, etc. You see this effect with American goods too. You have avocado green fridges still running for 50 years or washing machines from the 1970's that are still running. Things don't last today because we have paper thin metal and various other cheap parts and there is no incentive to make a washing machine that lasts for 40 years.
I received an old washing machine when i got married and a new dryer. That washing machine is super heavy, but still working. The dryer is a POS and the plastic knobs have all started failing, so I have to use pliers to turn the knob.
I'd pay 2x the price of a standard appliance to get a quality one without question.
Isn't part of the "50 year old fridges running" due to survival bias? Meaning : you aren't (and probably can't for obvious reasons) counting the vast numbers/majority of the same model of item that are no longer in service.
If you ever lived in the actual USSR, you must also remember how poor average people were, how hard was it to find and buy anything decent, or simply anything. Including food. Want a piece of meat? Spend two hours in a line. Want a piece of Bologna sausage, or butter? Here's your food stamp for a minimum monthly ration.
USSR just did not have enough resources to properly feed everyone using planned economy. It had to admit the very smallest pieces of market economy (sell apples from your orchard, don't go to jail) to keep people somehow fed.
I think there were several different periods where things were not bad, and when things were not that great, like the 60s, 70s, or 80s, and different people who lived in the USSR refer to different periods, so you get people claiming very different things.
> I'm living in post-USSR country and a lot of old consumer goods which were "made in USSR" are an etalon of quality compared to modern goods.
Maybe the simpler ones, like blow dryers. Cars made in communist Poland usually broke down within first couple of hundred kilometers of purchase. People used to take a new car to a (private, as in not-state-owned) mechanic, who would dissasemble it and then reassemble, to make sure everything was put together correctly. Not to mention that communist Poland, a nation of 40 million, was unable to design its own car and had to licence it for production from capitalist corporations.
Strictly speaking, Soviet goods (very few of them, though) were of somewhat decent quality when compared to the cheapest crap made in a non-name sweatshop for dollar stores. Or export to the Eastern Europe and ex-Soviet countries.
Even in the space, USSR achieved much more launches than the US for a simple reason -- Soviet satellites crapped out in months instead of years.
I'm living in post-USSR country and a lot of old consumer goods which were "made in USSR" are an etalon of quality compared to modern goods.
If you replace USSR with "period up to the late 80s", that statement is repeated in many countries, so maybe the central planning part is not the distinguishing factor.
>USSR failed because of human factor and probably because computers were not good enough to produce proper plan on a USSR-scale
I think this too. There has been recent work by Paul Cockshott (a computer scientist) on new models of central planning with modern computers. I'd urge anyone interested to check it out.
I investigated case with planning in USSR and found that all planing was done by single woman. She got position by "blat" (bribe + protection from someone in power). All planning process was down to increasing of previous numbers by 5-10% once in 5 years. No known computer in the world can fix that.
> I investigated case with planning in USSR and found that all planing was done by single woman.
That's interesting. Are you saying that the functionality of entire Gosplan organization from the 1920s all the way to the end was done by one woman? What was her name?
No, I'm talking about GOSPLAN in last 15 years of life of USSR. I forgot name of woman (I did investigation more than 15 years ago), but it was just one woman, protege of Babaian. I forgot details, so maybe it was yearly plan, but idea remains: for last 15 years, USSR was on autopilot and bribes.
Do you know meaning of words "tufta", "purga", "pripiski"? USSR officials were happy to perform on paper any reform, increase and improve anything, because it was the easy way to climb hierarchy. Glasnost` and Perestroika were symptoms of deeper problems with economy. The main problem was "everything is ours, so nobody cares".
"too much optimization at the expense of robustness"
That is not unique to central planned economies. Consider how the 2011 Thailand floods lead to a global shortage of hard disk drives, or the saline solution shortage in the US when the plants in Puerto Rico were damaged by Hurricane Maria.
I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects - and I believe 'robustness' counts as such - are beyond what can even hope to achieve. The author also points out:
> If it’s any consolation, allowing non-convexity messes up the markets-are-always-optimal theorems of neo-classical/bourgeois economics, too. (This illustrates Stiglitz’s contention that if the neo-classicals were right about how capitalism works, Kantorovich-style socialism would have been perfectly viable.)
Hence why capitalist systems may also have robustness problems.
"You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low."
I think that's an observation in how centralized systems are implemented. I don't see why robustness can't, at least in theory, be included as part of the optimization process.
Beyond the factors highlighted in the essay, of course, like the inability to decide how to weight those factors, and the non-convexity.
"That is not unique to central planned economies."
Yes, however, when it happens in market economies, it is not caused by planning for greater efficiency (saving money). Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce.
"I think the author expressed it clearly that the planning algorithms depend on linear programming, and that non-linear effects"
I disagree with that. I think planning itself (algorithms) is not the issue here, I think the objective is.
"I don't see why robustness can't, at least in theory, be included as part of the optimization process."
In theory, perhaps. But in practice, it's difficult to prove to the people in charge (whoever that is) that you made the system more robust, compared to proving that you made the system more efficient. So there will always be an inherent organizational bias towards efficiency.
Airlines are an interesting example of industry which strives for efficiency, yet has strong robustness guarantees through regulation enforced by central agency. (Although in this case, it is not economic robustness.)
Maybe the robustness of the economy as a whole is given by how much choice you have in being conservative or take an experiment. So there really cannot be "robustness" as an objective, since it depends on continual experimentation with different models of operation, where most of them fail.
>Nobody really decided there to be only one factory that produces hard drives; it is a consequence of hard drives being particularly difficult to produce.
Are they? To the point that some factories in Thailand had all/most the knowledge and equipment to do so?
I'd say it's exactly they were located in Thailand for exactly the same reason a planned economy would focus on: "greater efficiency (saving money)": it was convenient and cheaper to get them made there (except when it suddenly weren't).
What I am trying to say is that it was a convergent decision to buy from a single manufacturer (although perhaps cost-driven), rather than a decision to, in order to reduce costs, have only one manufacturer.
Making HDDs is quite difficult and there is only a handful companies that can do it. If the barrier to entry was lower, there would be more different manufacturers and probability of relying on single manufacturer would be reduced. Like in most other industries.
>What I am trying to say is that it was a convergent decision to buy from a single manufacturer (although perhaps cost-driven), rather than a decision to, in order to reduce costs, have only one manufacturer.
"however, when it happens in market economies, it is not caused by planning for greater efficiency (saving money)."
I think the author addressed that, writing:
> "For the capitalist or even market-socialist firm, there is in principle a simple objective function: profit, measured in dollars, or whatever else the local unit of account is."
"I disagree with that .. I think the objective is"
I'm not sure what you disagree with. My incomplete summary? The author also goes into detail about the problems in determining the objectives. I mentioned them in passing in my last line.
"In theory, perhaps"
Well, yes. That's because it's a response to the theoretical statement you wrote: "You can have an efficient system but it's robustness (ability to withstand a failure or adapt to change) will be very low."
Do you have any evidence that this is a universal statement?
Anyone worried about possible environmental catastrophes as the result of greenhouse gas omissions must certainly be wondering what can be done to include that robustness factor in a market economy.
I disagree with the usual notion that the problem of planning is somehow (algorithmically) difficult, once you know the objective function.
Instead, I argue there is a tradeoff in the objective function, which is hard to estimate in theory without experimentation. This experimentation goes against the goal of efficiency (you need redundancy).
So even if you knew all the demands of all the consumers, and could calculate what to produce (which e.g. von Mises argues is impossible), I argue you would still have a problem with central planning, because the resulting optimal plan would not be robust enough to execute. I also don't think the former is a big issue with computers, to be honest. There are examples of top-down logistical planning operations in the world which are comparable to an economy of a small country.
"Do you have any evidence that this is a universal statement?"
Well, in optimization problems, usually as you get closer to the possible optimum, the number of acceptable solutions decreases. So the closer the solution to the optimum, the less leeway there is to adapt the solution to some unforeseen circumstances.
Addendum: I think many economists try to paint free market as being efficient, and that's why they argue the optimization problem is impossible to solve. However, I don't think free markets actually are efficient, but rather, make a different trade-off, which works better in practice (it also has downsides).
The impact from greenhouse gases is already either a factor in some power markets (which heavily use state of the art optimization and are among the hardest problems to solve when you look at the size versus the time it has to solve in) or planned to be included. It is indirectly there in all power markets as coal is currently becoming less and less economic.
If you lived in communist Czechoslovakia you probably saw the amount of bullshit jobs in a (small) centrally planned economy. We had communist party activists in all institutions, secret police listening all day to people's conversations and the list could probably go on and on.
These might be considered useless but are not necessarily bullshit according to Graeber's definition. The definition of bullshit job is the person doing it knows that it is bullshit, yet they have to do it because there is no better job available for them.
And to be honest, I am not really sure there is less bureaucrats (which are only sometimes bullshit jobs) in the market system. I actually suspect the opposite, because there are much more hierarchies, and there is less people needed in agriculture and industry.
Speaking of bullshit jobs and hierarchies, here's a tangent.
Isn't it a little bit strange that we, the people of the world, who are striving for or already live in a market economy and a ndemocracy, are OK with living most of our lives in a hierarchy that in some ways resemble feudalism?
I'm a developer. I've chosen not to participate in "climbing the ladder" because that would make me less of a developer and more something else. I'm happy being a developer but I find I don't at all enjoy being at the bottom.
I am in a similar position and I find it strange, too. That's why I am pro (direct) democracy and minimum basic income, and more or less against power hierarchies.
But I know many people that don't want that, or don't care.
It's similar to a centrally planned economy but at a smaller scale. Imagine if your whole economy was organised like that, along with politics and you've got yourself a dystopia.
Not too diminish the aspect which is particular to communist Czechoslovakia, but it is a hard earned tenet of highly available systems best practices to have redundancies throughout a given stack. For example, a storage system that has disks in RAID, dual RAID controllers, dual NAS servers, dual connectivity to switches, etc is more expensive but worth it in the long run if you depend on it.
Maybe that lesson hasn’t been absorbed more widely. Market economy perhaps gets redundancy for “free” (or cost subsidized by losers)
>Market economy perhaps gets redundancy for “free” (or cost subsidized by losers)
That's a platitude, not a fact. We just are moved to believe that the market is naturally redundant by propaganda, our governments in the west urge us not to look at the instances where it's not, like economic collapses caused by banks or other government investing groups that are "too big to fail."
What the author fails to address is the most recent research into the planned economy that Towards a New Socialism advocates. It advocates for an economy that is still socialist in nature (in seeking to eradicate the commodity form) while still aggregating opinion into production as market forces do. This is accomplished by using a labor token while using market forces to influence prices and planning. Sure, it can't be optimised perfectly, but neither can our current one, and that is never the goal of a socialist economy anyways.
For me, the principal problem of central planning is that you cannot plan for innovation. Innovation works best in competitive capitalistic environments, where there is a significant prize awaiting innovators.
Haven't there been many innovators and scientists who come from the most unlikely walks of life, and die penniless? Did Einstein, for instance, not have to divide his time between work at the patent office and groundbreaking research?
> Innovation works best in competitive capitalistic environments
Well, a huge chunk of innovation in capitalist countries happen on university campuses or within government funded organizations like DARPA or NASA, or within communist-like arrangements like Open Source (Linux, Apache, etc). Which are then appropriated by private interests to be monetized.
He understood socialism and its' problems much better than capitalism. He never understood capitalism but got stuck with his understanding in something reflecting a middle-ages barter economy.
"Unfortunately, the problem this appears eventually to lead to, is collapse. The problem is the connection with debt. Debt can be paid back with interest to a much greater extent in a growing economy than a contracting economy because we are effectively borrowing from the future–something that is a lot easier when tomorrow is assumed to be better than today, compared to when tomorrow is worse than today."
Capitalism is a debt based economy, requiring to pre-finance industrial production. In the end, the debt pressure drives the whole process. Something Mises, who never worked in a company his whole life, fundamentally did not understand. He thinks you have to "save" to "invest" later.
You can't just produce "things" out of thin air so the idea that you can finance future production without (someone, somewhere) deferring present consumption is not really valid. All interest is is an incentive for people to defer present consumption for a higher level of future consumption.
Unless, of course, you just print up a bunch of money and then you aren't exactly "borrowing from the future" but taking from the current holders of the currency through lower future consumption due to inflationary devaluation of the currency [--edit--] and also taking from the current holders of the currency by artificially driving up current prices.
And that Robinson Crusoe bloke stuck on an island...
Call them. Tell'em they are doing it wrong. They should start saving first to do some "investments". By the way, Mises never worked one day in his live in any free market enterprise.
> > He thinks you have to "save" to "invest" later.
> Because that's the truth.
Well, start telling this VW, BASF, Dow Chemical, Ford and the whole bunch the next time they take a billion dollar loan in expectation that it will pay off. Even Intel has 30 Billion long term debt.
> You can't just produce "things" out of thin air so the
> idea that you can finance future production without
> (someone, somewhere) deferring present consumption is not > really valid.
Exactly this is what capitalism is about. The the pressure created by debt, is exactly what makes capitalism very dynamic.
> Unless, of course, you just print up a bunch of money and
The idea that "only gold is money" was stupid, is stupid and always will be stupid. Even with gold back money you would be able to take loans. The only thing you would achieve is lower economic growth.
> And that Robinson Crusoe bloke stuck on an island...
THe Robinson Crusoe guy is perfectly a guy that Mises is describing. But he is closer to a middle ages barter economy than to anything called capitalism.
This touches some things:
"In simplest terms, our problem is that we as a people are no longer getting richer. Instead, we are getting poorer, as evidenced by the difficulty young people are now having getting good-paying jobs. As we get poorer, it becomes harder and harder to pay debt back with interest. It is the collision of the lack of economic growth in the real economy with the need for economic growth from the debt system that can be expected to lead to collapse."
https://www.resilience.org/stories/2014-02-12/limits-to-grow...
He wobbles of "saving" and "investing". Sitting on a desk, having worked his whole live beyond a desk and never for a free market enterprise, he tries to understand capitalism.
Do you remember his quote: "
“Credit expansion can bring about a temporary boom. But such a fictitious prosperity must end in a general depression of trade, a slump.” — Ludwig von Mises
Wow. Look who is talking. A master or an idiot? You never know. Out of curiosity, can you show me an economic boom that does NOT come with a credit expansion? The sentence is a tautology. Meaningless. "The Banana is big but it's shell is bigger". Wow.
That and a devastating attack against socialism (from which they never recovered) which is the very reason you felt the need to engage in ad hominem attacks...
But, alas, if had ever actually read anything he wrote you would see his insights don't really apply to a barter economy at all -- unless they want to do something crazy and solve the coincidence of wants problem to evolve into an actual modern economy.
One thing I got out of the article is that an alternate-reality communist economy can be more efficient than a capitalist economy, given a good objective function. The way to do it is to simulate a market economy on your central-planning computer: Simulate a network where each node models a consumer or supply chain unit. This runs the same computation as a market economy, but propagates price signals much faster. It's faster and cheaper to do an RDMA access than to wander around a grocery store comparing the price of bread to rice.
The trouble is in formulating a good objective function. Perhaps you can solve the problem of consumers expressing preferences that Cosma discusses in "The Given Assortment, and Planner's Preferences" by imitating a market economy. Each person receives a fixed salary which they spend at state stores. Since this is how the computation performed by a market inputs consumer preferences, this is the input used by the central computer in its market simulation. But the simulation reaches equilibrium much faster than the real market and its objective function is more fair than a real market (since everyone gets the same salary).
I suppose there are bigger problems with formulating the objective function than consumer preferences. Creative kinds of economic activity are important and leaders that want to hold control may not allow you to formulate the objective even if you could.
"I suppose there are bigger problems with formulating the objective function than consumer preferences."
Maybe producer preferences?
The fact that one prefers to be a mechanic or a nurse does not influence the planning algorithm (AFAIK): people are just pawns on a chess board, like any other resources.
Is that necessarily so? You could argue that producer preferences are some kind of soft constraint that can be maximised (albeit subsidiary to the hard constraint solution)
He sets up his own straw man, and demolishes it. Big deal.
If you really had to solve this problem, you'd need to divide it into sub-areas, like "clothing" and "heavy machine tools", and solve it hierarchically. The solution will be somewhat suboptimal but should come close.
The trouble with a capitalist model is that it's a huge collection of feedbacks and delays, so it oscillates around some optimum. That's a basic result from control theory. Delay causes instability.
The USSR's Gosplan had a monthly reporting cycle and a yearly planning cycle.
That was pre-Internet and too slow to work. WalMart has a daily reporting cycle (probably faster now) and a weekly planning cycle, and runs a consumer economy bigger than the USSRs.
Not that industrial optimization is the controlling issue today. That's a problem for when you don't have enough manufacturing capacity. We're past that.
I don't think the planning in the USSR and Walmart are remotely comparable, and not just in terms of timeliness. A central planner is deciding who needs what, how much, when, and where. But Walmart is discovering who needs what, how much, when, and where. They aren't decided well in advance what people need; they are working to understand what people want and how to get it to them. How much you can sell and at what prices drive their forward-looking decisions around what people value. Without those signals, a central planner can't really know who values what. It's just guesswork.
Must it be guesswork? Most of us have devices (computers and mobile phones) that could very easily be used to register demand for various products and to show what's available. In what way precisely does Walmart work to understand what people want which a planned economy could not possibly?
Prices communicate not just demand in the sense of "I want it" but also "I want it approximately this badly and not more than that". With no price signal to indicate the extent of a demand, it's up to the whim of the planner to decide who needs good X the most. Pressing an "I want this" button in an app doesn't at all distinguish between "I'd like to have it if it's free, but it's not essential" and "if I don't get this right now, my life is over". Sure, you could try to engineer in levels of demand (nobody ever abused the "urgent" button in email systems, right?), but what you'd ultimately end up doing to get an accurate estimate of what trade-offs people prefer across different demands for goods is that you'd have reinvented prices.
The reporting was mostly BS or too late or they tried to adjust reality to meet their quotas. They doctored the numebrs to look good. When only the state has a stake in all of companies and everybody is an employee of the state, there is zero interest for things to work out the way they were intended to. And this is why capitalism works better practice: because it encourages individual enterprise while it also encourages cooperation amongst individuals when things get rough.
>When only the state has a stake in all of companies and everybody is an employee of the state, there is zero interest for things to work out the way they were intended to.
This can easily be rephrased to:
"when all the major politicians have stakes in all the major companies, there is zero interest for things to work out the way they were intended to."
And now there's no actual argument to what you're saying. Both systems have flaws. That does not prove one's better, you need more then that.
Seeing the flaws is the first step to asking yourself the question, "is there a better way to do this?"
Do you think we're better off because our corporate funded politicians have all the power, and we're just living in their fiefs? Is that the sign of a good system?
Capitalism uses minor successes in it's lower classes like bread and circuses. They're distractions. Don't say to yourself, "at least I'm not starving in some South American country", ask yourself "why can't we all be doing better?" Is this system really the best mankind can do?
You should probably live in a planned economy for at least ten years to be able to tell the difference. I've experienced both. You've got corrupt politicians, bread and circus in both of them. If there are other experiments like the USSR I just hope they don't drag other countries into their mess.
I think this frame of market capitalism as a set of feedbacks and delays is crucial. Though I expect that there will just be different ones with alternative systems in practice.
>In certain cases, Russians were very well-incentivized by things like “We will kill you unless you meet the production target”.
Come on. Outside of POWs during the war (and that's not what were talking about) no factory workers are getting dragged out back and shot. The story of collectivization on farms is more complicated but it still didn't involve on the spot murder.
It's like people watched that movie where the Russians are at stalingrad, and the commisar gives every two men a rifle and shouts "first man shoots the rifle, if the first man dies, the second man picks up and shoots the rifle." -- And then everyone collectively thought "oh, not only is this true but this absolves me of any responsibility to actually learn about the USSR."
Read some books, talk to some older Russians. There was some extremely dark times in the history of the USSR. But for a lot of it's history, it was just a normal western-ish country. It wasn't like war time Nazi Germany 24/7. You weren't getting shot for not making enough hinges one day.
Umm, have you ever lived in USSR? Being born in the 80's doesn't count either.
There absolutely were times when being a few minutes late to work (not during the war either) would get you a long prison sentence at the very least.
Also, it never were "a normal western-sh country". Russia hasn't been, and USSR in toto had no reasons to be either.
Works of marxist "economists" shouldn't even be dignified with a discussion, but is is greatly concerning that there is such a thing as whitewashing of the soviet regime, and that it is considered to be far more acceptable that whitewashing nazis.
In the three decades Stalin was general secretary, the Soviet Union had enormous economic growth. Russia went from being a backward peasant country ruled by a czar, to being the first country to send a satellite to space. Its success and its example were what was feared. While unemployment was 25% in the US in 1933, the USSR was charging forward, and US and European firms and workers were going there to work.
On Stalin's death, Khrushchev announced economic growth was no longer a priority, and other such policies, and stagnation set in.
China also had enormous economic development under the communist party from 1949 to 1978, and from 1978 to now (although the party took a right turn under Deng Xiaoping in 1978, to where some question if China was socialist after then).
The average inflation-adjusted hourly wage in the US is below what it was 45 years ago, leading to anti free trade Trump and Bernie Sanders and Alexandria Ocasio Cortez. Also Corbyn, Syriza, Brexit, ping-pong from Lula to Bolsonaro, TARP bank bailouts plus the carbon externalities destroying the planet.
Of course, I don't think a traditional Marxist worldwide communist revolution of factory workers led by Leninist parties will happen.
The present economic system might be eradicated though. It has not been all that long since European kings were having their heads chopped off or were being bayoneted to death in basements.
Note that South Korea, Japan and others also went through rapid industrialization and economic improvement during this time.
I don't think China is a great model, their development was supercharged by demand from the USA for products made with low cost labor. What Cuba accomplished wrt education & lifespan (they live longer than us Americans!) is quite impressive.
The USSR managed quite a feat too (being a world power for quite a few decades) for essentially being a landlocked country with minimal infrastructure and an uneducated population of serfs that was half as numerous as us Americans. Breaking up the existing communes and murdering the Soviets (then using their name) were terrible things though.
The USSR accomplished quite a bit coming from a nation of malnourished serfs that were formerly used as cannon fodder.
Breaking up the existing communes and murdering the Soviets (then using their name) were terrible things, but its impressive that a landlocked country with minimal infrastructure and an uneducated populace could fight off Germany and liberate most of Northern Europe, push the bounds of science, and be a world power for a number of decades despite having half the populace of the other world power of that era.
You mean liberate them just to enslave them again?
You list many achievements of the USSR that are certainly impressive, I just don't think they matter on the whole to the people who lived (and starved to death and were murdered) in the USSR.
Of course, the Stalinist "economic growth" was built on the bones of millions forced into slavery. Do you really consider this kind of growth desirable or sustainable?
Not to excuse the brutalities of the Stalinist regime, but isn't our own economic growth built today on almost intolerable conditions in sweatshops, child labour and qualitatively bad ways of living life in various parts of the world and even closer to home?
The difference is that in Soviet Russia, people were forced to work in labor camps. In many developing countries, adults and children work of their own free will in bad conditions because it's the best option they have.
Isn't this the same justification for the horrible conditions during the industrial revolution? If the system mandates that the only good option to live life is to work under such conditions of your own 'free will', doesn't mean that there's a problem with the system? Aren't you ignoring the effects of structural (rather than merely direct, as we saw in the USSR) violence?
Here's a quote dated 1864 from "Dr. Simon", the chief medical officer of the Privy Council and the official editor of the “Public Health Reports,” says:
“In my fourth Report (1863) I showed, how it is practically impossible for the workpeople to insist upon that which is their first sanitary right, viz., the right that, no matter what the work for which their employer brings them together, the labour, so far as it depends upon him, should be freed from all avoidably unwholesome conditions. I pointed out, that while the workpeople are practically incapable of doing themselves this sanitary justice, they are unable to obtain any effective support from the paid administrations of the sanitary police.... The life of myriads of workmen and workwomen is now uselessly tortured and shortened by the never-ending physical suffering that their mere occupation begets.”
Have conditions improved elsewhere in the world today compared to 1863 England? Is there any justification, other than an economic one, for someone's only option to be living such a qualitatively depraved and horrid life, only of production, even if better than other options? It's hard to believe that you're making an excuse for child labour by saying it's the best option they have. If it's the best option they have then we should damn make sure it's not.
> In the three decades Stalin was general secretary, the Soviet Union had enormous economic growth.
China also had enormous economic development under the communist party from 1949 to 1978
Suprisingly (or rather unsurprisingly) they've also managed to starve tens of millions along with their 'growth'.
What von Mises has proven logically in 1920 (and the practical experience has confirmed it later over the course of 20th century - repeatedly, dozens of times, in different countries, with different cultures) is that a centrally planned (i.e. socialist) economy ALWAYS SELF-DESTRUCTS.
It has nothing to do with computers and collection of information and planning algorithms. The issue (completely misunderstood by the author of the article discussed) is that the very fact of coercing people destroys information about their subjective utility functions which could only be gleaned by observing FREE exchange. No amount of fancy software or social engineering will fix it. Garbage in - garbage out.
Socialism is a very bad idea. No ifs and no buts about it. And, yes, Marx was a kook. His entire economic and social theory is a humongous monument to the principle of logical explosion: if you start with nonsense (labor theory of value), you end up being able to derive anything from it. (The fact that labor theory of value is nonsense is easily established by observing "value" created by someone digging a hole and filling it in - any number of times, so as to put in arbitrarily large amount of labor).
Ghm. Mathematics and sciences are rather successful in reality. Natural language can be used in a rather rigid and formal manner - and mathematical language can be used carelessly and in error. (In fact, using natural language carefully may be preferable to playing with formal symbols - as it makes gaffes and logical gaps more visible to the readers.)
>The fact that labor theory of value is nonsense is easily established by observing "value" created by someone digging a hole and filling it in - any number of times, so as to put in arbitrarily large amount of labor
Is rubbish. In fact, if you read less than the first chapter of Capital Vol. 1, Marx specifically rebuts this argument on the third page, in which he restricts himself to 'socially useful' labour performed at the rate necessary to complete it. Not even anti-Marxists use this argument any more because it simply doesn't hold for Marx's theory, nor even Smith and Ricardo's. Mises himself doesn't use this argument.
Of course, anyone who is friends with logic will immediately spot that "socially useful" cannot be defined in any way which does not depend on (drumroll) value to the people.
In other words, all Marx said is that value is created when labor creates value. Duh. Circular reasoning of this sort is a hallmark of kookery, and it takes a rather brainwashed mind (or absence thereof) to miss this obvious logical fallacy.
There are other ways to demonstrate the idiocy of the labor theory of value: for example by constructing a realistic scenario when clearly "socially useful" labor (for example, work at a factory) destroys value of a "free for all" resource which wasn't created by labor at all - i.e. by polluting the air). Incidentally, Soviet Union was full of grossly polluting factories.
I think a personal anecdote is in order: unlike Western Marx fanboys I happen to be formally educated in Marxism, at the top university in the USSR, no less, (this was mandatory, I wouldn't poison my mind with that junk willingly). The professor reading the course of Political Economy was the well-known Marxist/Leninist textbook author and certainly was quite smart. So after his first or second lecture (I don't remember exactly which, it was 30 years ago), I asked him to clarify exactly the point above: how to define which labor is useful and which it is not. He called me into his office and told me in no uncertain terms to never ask questions like that again if I wanted to stay out of trouble (didn't help), and that the best answer was "whatever Party directs us to work on". This pretty much clarified everything regarding Marxism to me, and I took his advice to heart, so I still have my transcript from MSU with "with distinction" ("отлично") marks for Marxist/Leninist Philosophy, Political Economy, and Scientific Communism. I guess I should thank him for a sound advice on surviving cult indoctrination.
You are equivocating on 'value'; firstly, the law of value only applies to goods which are commodities (complexes of 'use value' and 'exchange value') - the 'use value' would be there even if the good were not traded, and it is usually independent of the exchange value. In various pre-capitalist societies, there were many such goods produced (but, as you can expect, digging a hole might have use value to the person doing it, but not exchange value which is dependent on society in general). Secondly, the law of value only applies to goods which can be freely reprocuded, so it has difficulty with patents and copyrights in modern society, so I don't claim that the law of value 'works' for all categories of products in today's society.
Either way, you shouldn't act as though you and your professor uncovered some kind of devastating flaw in Marxism, even at the time; it takes a lot of hubris to accuse modern political economists and Marxists of being brainwashed to such a basic 'logical fallacy'.
The law of value works such that a person digging a hole in the ground obviously isn't producing exchange value, thus the person digging a hole won't continue to do so, in the long run in society, the value of commodities is quickly realized.
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