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Economic calculation

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Soviet cogitations: 589
Defected to the U.S.S.R.: 07 Dec 2013, 14:24
Ideology: Democratic Socialism
Unperson
Post 20 Jan 2014, 13:45
http://en.wikipedia.org/wiki/Economic_c ... on_problem

What would your rebuttal be to the this problem?

I’ve never heard a convincing rebuttal to the economic calculation problem and this is honestly the only problem, to me at least, that makes communism/socialism unworkable. That is not to say there never will be answer, I am optimistic, but all the other arguments against socialism, it’s against human nature, look at USSR ect are easily dealt with and lack substance. But regarding economic calculation, what is your take on this issue?
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Defected to the U.S.S.R.: 18 Apr 2010, 04:44
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Philosophized
Post 20 Jan 2014, 14:03
The capitalist "market", with all of its constituent parts (capital, value, profit, etc.) is every bit as fictitious as any religious proposition concerning the benevolence of a Supreme Deity.

Ye Wise Wiki wrote:
Trotsky argued that central planners would not be able to respond effectively to local changes in the economy because they operate without meaningful input and participation by the millions of economic actors in the economy, and would therefore be an ineffective mechanism for coordinating economic activity.

That's probably the fairest criticism anyone could make concerning a socialist planned economy. No capitalist argument can top that one, since Socialism does away with the voodoo shenanigans of market fetishism.
Miss Strangelove: "You feed giants laxatives so goblins can mine their poop before the gnomes get to it."
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Defected to the U.S.S.R.: 07 Oct 2004, 22:04
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Resident Soviet
Post 20 Jan 2014, 15:50
Trotsky's critique is somewhat more valid than that of Mises, for the reason Order noted. All human forms of socio-economic organization are fictitious; some just require more effort to run effectively. In answer to Trotsky, I can postulate computerization of planning as the solution. You can find more info on the subject here: http://www.soviet-empire.com/ussr/viewtopic.php?f=128&t=48509
"The thing about capitalism is that it sounds awful on paper and is horrendous in practice. Communism sounds wonderful on paper and when it was put into practice it was done pretty well for what they had to work with." -MiG
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Defected to the U.S.S.R.: 08 Nov 2007, 06:31
Embalmed
Post 20 Jan 2014, 18:02
Mises doesn't think you can measure value without prices and thus the market. Who cares.

It's wholly irrelevant as he is just criticizing community-managed commodity production, which he postulates as common ownership.

It's more or less a critique of an economy entirely encompassed by a single corporation. Mises argues you can't have exchange in such a situation as everything is internal. Which is true.

I'd care, but socialists don't even concern themselves with exchange values in general. Otherwise, we have the same means to determine exchange value (and thus a semblance of price) which is socially necessary labor-time, and the usefulness of it to the demand (use value).

The crux of this argument is based on a rejection of LTV which you must accept for this to apply at all.
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Defected to the U.S.S.R.: 28 Jan 2008, 19:10
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Komsomol
Post 20 Jan 2014, 19:19
Bryan Caplan is a virulently anti-Communist Ayn Randist, and yet even he coming from the tradition of NeoClassical Economics says that Hayek and Mises are totally off base when it comes to socialist calculation being IMPOSSIBLE. If that were the case, the question would not be why did the USSR eventually collapse, but how it managed to become the 2nd strongest industrial power, defeat Hitler and launch Sputnik and compete globally for 80 years. For metaphysical anti-communists the question is not why did the USSR collapse, but why did it endure for so long?

Of course neoclassical economists would argue planning is inefficient on utilitarian grounds. And thats a debate worth having. But you can't debate those who outlaw Communism a priori, simply because they don't want it to exist.

So these are the views of an extreme Ayn Rand-loving pro-capitalist anti-communist on why Hayek is totally off:

http://econfaculty.gmu.edu/bcaplan/whyaust.htm

Quote:
3.1. Economic Calculation and the "Impossibility" of Socialism

Mises considered the "socialist calculation argument" to be a decisive objection to the economic feasibility of socialism. There are other valid arguments against socialism; indeed, "No judicious man can fail to conclude from the evidence of these considerations that in the market economy the productivity of labor is incomparable higher than under socialism."[25] However, Mises insists, this does not decide the issue:

If no other objections could be raised to the socialist plans than that socialism will lower the standard of living of all or at least of the immense majority, it would be impossible for praxeology to pronounce a final judgment. Men would have to decide the issue between capitalism and socialism on the ground of judgments of value and of judgments of relevance. They would have to choose between the two systems as they choose between many others things... However, the true state of affairs is entirely different... Socialism is not a realizable system of society's economic organization because it lacks any method of economic calculation... Socialism cannot be realized because it is beyond human power to establish it as a social system.[26]
This conclusion is amazing, for Mises repeatedly insists that economic theory gives only qualitative, not quantitative laws? For example, in Human Action, Mises tells us that:

The impracticality of measurement is not due to the lack of technical methods for the establishment of measure. It is due to the absence of constant relations. If it were only caused by technical insufficiency, at least an approximate estimation would be possible in some cases. But the main fact is that there are no constant relations. Economics is not, as ignorant positivists repeat again and again, backward because it is not "quantitative." It is not quantitative because there are no constants. Statistical figures referring to economic events are historical data. They tell us what happened in a nonrepeatable historical case.[27]
If so, then how could he possibly know by economic theory alone that the negative effect of the lack of economic calculation would be severe enough to make socialism infeasible? Granted, the socialist economy would suffer due to the impossibility of economic calculation; but how, on his own theory, could Mises know that this difficulty to so severe that society would collapse?

The strength of this objection becomes even clearer when we consider the economic decision-making of Robinson Crusoe, alone on his island. As Mises explains, "Isolated man can easily decide whether to extend his hunting or cultivation. The processes of production he has to take into account are relatively short. The expenditure they demand and the product they afford can easily be perceived as a whole."[28] Crusoe's runs his one-man economy simply by using "calculation in kind" - mentally weighing his preferences and opportunities to make decisions. Mises concedes that this situation is conceivable, adding only that this method is unworkable for a larger economy. "To suppose that a socialist community could substitute calculations in kind for calculations in terms of money is an illusion. In an economy that does not practice exchange, calculations in kind can never cover more than consumption goods. They break down completely where goods of higher order are concerned."[29]

This suggests some obvious questions. Does Crusoe's one-man socialism become "impossible" when Friday shows up? Hardly. What if 100 people show up? 1000? Mises' distinction between a modern economy and Crusoe's, and why the economic calculation argument applies only to the former, again shows that Mises has underlying quantitative assumptions in spite of his strictures against them. He is making a quantitative judgment that the lack of calculation would not greatly worsen Crusoe's economy, but would devastate a modern economy. Perhaps Mises was right, but pure economic theory did not give him the answer.

Ever since Mises, Austrians have overused the economic calculation argument. In the absence of detailed empirical evidence showing that this particular problem is the most important one, it is just another argument out of hundreds on the list of arguments against socialism. How do we know that the problem of work effort, or innovation, or the underground economy, or any number of other problems were not more important than the calculation problem?

The collapse of Communism has led Austrians to loudly proclaim that "Mises was right." Yes, he was right that socialism was a terrible economic system - and only the collapse of Communism has shown us how bad it really was. However, current events do nothing to show that economic calculation was the insuperable difficulty of socialist economies. There is no natural experiment of a socialist economy that suffered solely from its lack of economic calculation. Thus, economic history as well as pure economic theory fails to establish that the economic calculation problem was a severe challenge for socialism.[30]


Read full paper here:
http://econfaculty.gmu.edu/bcaplan/pdfs ... ssible.pdf

So even capitalist economists don't accept it as an empirical argument. It is more of a debating tool.

As for the Labor Theory of Value it was the work of all of the patron saints of classical liberalism- Aristotle, Aquinas, Locke, Ben Franklin, Adam Smith, David Ricardo. And Marx brilliantly took the lynchpin of capitalist economics and exploited its radical implication. Then suddenly LTV went from being Adam Smith's brainchild to being Marx's kooky idea.

If some 21st century Marx was to adapt marginal utility as the new foundation of socialism, the capitalist rats would jump from the neoclassical ship just as quickly.

Funny thing is that actual capitalists like Warren Bufett, who you know actually try to make money on the stock market as opposed to cheerleading it, actually do believe in something like an objective producerist theory of intrinsic Value. As opposed to the wannabe Austrian and Chicago Schools who believe that market prices are always right.

https://en.wikipedia.org/wiki/Value_investing
Kamran Heiss
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Defected to the U.S.S.R.: 08 Nov 2007, 06:31
Embalmed
Post 20 Jan 2014, 19:38
The USSR becoming an industrial power doesn't really prove anything in regards to calculation though. Even Stalin admitted there was commodity production (and thus capitalism). Much of the funds and expertise for industrialization came externally through trade and such AFAIK.

The soviet economy being based on the calculations of the world market isn't really out of the question.
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Defected to the U.S.S.R.: 30 Aug 2008, 18:12
Party Member
Post 20 Jan 2014, 19:41
It's something I intend to read up on eventually (not for a while due to so much other stuff on my reading list). However the main argument I see is that true socialism veers away from capitalist notions of exchange and thus from exchange value itself. Critics of socialist society tend to retain capitalist notions of value and exchange in their criticisms.

As an aside, I always thought computers could be harnessed to make all the huge and rapid calculations needed to help in a planned economy.
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Defected to the U.S.S.R.: 28 Jan 2008, 19:10
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Komsomol
Post 20 Jan 2014, 19:42
Conscript wrote:
The USSR becoming an industrial power doesn't really prove anything in regards to calculation though. Even Stalin admitted there was commodity production (and thus capitalism). Much of the funds and expertise for industrialization came externally through trade and such AFAIK.

The soviet economy being based on the calculations of the world market isn't really out of the question.


Well then the Hayekians become reverse Trotskyists. Trotsky said Socialism could not triumph until World Communism was achieved, Hayek seems to suggest Socialist Calculation cannot fail until World Revolution is complete.
Kamran Heiss
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Defected to the U.S.S.R.: 08 Nov 2007, 06:31
Embalmed
Post 20 Jan 2014, 19:50
I don't know why people think iit's just trots who say that.

But I interpret it more as suggesting socialist calculation is impossible, that we will forever rely on the market for whatever, and that abolishing it will destroy us. Pretty consistent with the ruling class' overbearing nature in general, their ideology is a wholesale condemnation of the commons and its ability to manage itself.
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Defected to the U.S.S.R.: 01 Mar 2011, 14:10
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Komsomol
Post 20 Jan 2014, 21:27
Conscript wrote:
Much of the funds and expertise for industrialization came externally through trade and such AFAIK.
Obviously there was a need for certain products to be imported and some foreign technical expertise was sought after due to a relative lack of it at home, but the Soviet economy was largely relying on its own forces in the industrialization process.
Loz
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Defected to the U.S.S.R.: 06 Dec 2009, 23:17
Philosophized
Post 20 Jan 2014, 21:33
Quote:
Obviously there was a need for certain products to be imported and some foreign technical expertise was sought after due to a relative lack of it at home, but the Soviet economy was largely relying on its own forces in the industrialization process.

And by that you mean the ruthless super-exploitation of the workers and collective farmers, all coupled with extra state-violence? That the Kremlin ideologists called that "socialist accumulation" doesn't change those facts.
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Defected to the U.S.S.R.: 28 Jan 2008, 19:10
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Komsomol
Post 20 Jan 2014, 22:00
If your interested in a serious scientific study of LTV, Paul Cockshott has written a number of academic papers substantiating the theory with empirical statistical evidence.

http://www.dcs.gla.ac.uk/~wpc/reports/index.html#econ

In one table the data shows a 97.4% correlation between prices and labor values in the USA, which is a pretty strong case.
http://eprints.gla.ac.uk/47872/1/47872.pdf

The thing is capitalist economics is mostly for anti-socialist propaganda. Most businessmen find mainstream academic economics worthless, precisely because it worships the rationality of the market far more than is merited. The economics that actual businessmen use is the economics of Marxism. Whatever rhetoric they may use, most successful businesses BEHAVE as though they believe in LTV.

Paul Cockshott is a computer scientist, and also has a few useful articles on the application of computers to economic planning.

As early as the 1910s, Marxist economists were recognizing the degree to which state-monopoly capitalist economies were already becoming de facto planned under the dictatorship of Finance Capital. This trend has only accelerated in recent years with the development of algorithmic trading in the stock market. Essentially computers already are planning capitalist economies under the dictates of Finance Capital. Unfortunately since the goal of these algorithm bots is to maximize profit, they are just as likely to crash the economy as to run it efficiently. Still it is a step towards rational planning, the degree to which massive flows of capital are already outside of the hands of humans and in the hands of algorithmic bots.
Kamran Heiss
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Defected to the U.S.S.R.: 01 Mar 2011, 14:10
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Komsomol
Post 20 Jan 2014, 22:44
Loz wrote:
And by that you mean the ruthless super-exploitation of the workers and collective farmers, all coupled with extra state-violence? That the Kremlin ideologists called that "socialist accumulation" doesn't change those facts.
What "super-exploitation"? Workers reacted to the Five-Year Plan with enthusiasm, and also played an active role in the collectivization campaign through persuading the peasantry. Out of the industrialization of the USSR came widespread investments in education, health care, and other services, investments which were not possible beforehand.

Exploitation only came with the restoration of capitalism by the Soviet revisionists.
Loz
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Defected to the U.S.S.R.: 06 Dec 2009, 23:17
Philosophized
Post 21 Jan 2014, 13:04
Quote:
What "super-exploitation"? Workers reacted to the Five-Year Plan with enthusiasm, and also played an active role in the collectivization campaign through persuading the peasantry. Out of the industrialization of the USSR came widespread investments in education, health care, and other services, investments which were not possible beforehand.

Obviously, since people were working and building what they though would be a better future. Still the living standards in the USSR didn't reach the 1928 until the late 30s. And "persuading" the peasantry didn't work that well until the police and the army joined it, just like those "food armies" from 1918 didn't manage to "persuade" the peasants from handing over their grain without violence.
Obviously that there had to have been some improvements in health-care, education and so on that always went hand-to hand with any industrialization.

Quote:
Exploitation only came with the restoration of capitalism by the Soviet revisionists.

Sure.
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Defected to the U.S.S.R.: 01 Mar 2011, 14:10
Ideology: Marxism-Leninism
Komsomol
Post 21 Jan 2014, 19:28
Loz wrote:
Still the living standards in the USSR didn't reach the 1928 until the late 30s.
Bearing in mind, of course, Stalin's quote on the need to catch up to the advanced capitalist powers lest they crush the proletarian dictatorship.

Quote:
Obviously that there had to have been some improvements in health-care, education and so on that always went hand-to hand with any industrialization.
Not just "some" improvements. The USSR had unparallelled levels of social spending that rose throughout the 30s. The system of social insurance was likewise unlike that of the capitalist countries (which such services docked the pay of workers.)
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Defected to the U.S.S.R.: 07 Dec 2013, 14:24
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Unperson
Post 21 Jan 2014, 23:16
The USSR in the 30's also had unparalleled levels of famine, repression, executions etc.
I'd rather have my pay docked than be starved, shot or live in a climate of paranoia and fear.
Go before a show trail or have 6d knocked off me wages? No brainer.
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Defected to the U.S.S.R.: 04 Aug 2004, 20:49
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Embalmed
Post 22 Jan 2014, 19:57
I think I'll try to get hold of anything by Leonid Kantorovich and also about Vasili Leontief's input-output model to get anything. I do actually have a book on its way to me in the post which addresses an input-output analysis of the Soviet economy in the 1970s (Studies in Soviet Input-output Analysis, by Vladimir Treml), of course - when it was a mature model that had moved away from the vague speculations from Lenin about what a socialist economy should look like, and had thusly moved away from the sheer administrative and organisational mess it remained until the late 1940s.
It should be pretty good reading.
Just had a leaf through a volume by Alec Nove that I got through the post today (Political Economy and Soviet Socialism) and will see what I can find about the planning and calculation problem. I have one of his books already (lying around that I've not looked at yet beyond the opening three chapters) - "The Economics of Feasible Socialism". Do a bit of research yourself to bring to the table, Yami, Wikipedia is just an MMORPG with people who just copy things from other encyclopaedias or uncritically from textbooks.
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Soviet cogitations: 589
Defected to the U.S.S.R.: 07 Dec 2013, 14:24
Ideology: Democratic Socialism
Unperson
Post 23 Jan 2014, 12:37
Yeah, Nove’s books was rubbish, if you read it you can see for him the only alternative to private capitalism that he sees as possible in state capitalism. Yet, bizarrely Nove even acknowledges that there would continue to be those who would denounce it as state capitalism and urge workers to continue fighting for higher wages and better conditions. He describes them as fanatics and extremists!
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Defected to the U.S.S.R.: 04 Aug 2004, 20:49
Ideology: Democratic Socialism
Embalmed
Post 23 Jan 2014, 13:09
And what's exactly wrong with that while a decent other model of economic organisation is being worked out? Tell us, o great one.


What is your alternative if absolutely every other currently workable and sane solution is apparently "state-capitalist" and therefore bad? Also, why did you bother posting this entire thread when there were a few already around? Was it to just answer your own question and repeat the same, trite catchphrase you have become associated with?
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"Phil Spector is haunting Europe" -Dr. Karl H. Marx
Soviet cogitations: 670
Defected to the U.S.S.R.: 01 Mar 2011, 14:10
Ideology: Marxism-Leninism
Komsomol
Post 23 Jan 2014, 15:54
Yami wrote:
The USSR in the 30's also had unparalleled levels of famine, repression, executions etc.
I'd rather have my pay docked than be starved, shot or live in a climate of paranoia and fear.
Go before a show trail or have 6d knocked off me wages? No brainer.
Tsarist Russia had famine. Collectivization ensured that famine would not come to the USSR ever again.

Also Robert Thurston in Life and Terror in Stalin's Russia notes that workers saw the purges as an opportunity to denounce corrupt bureaucrats and assert themselves. Feelings of terror were not equally shared in Soviet society.
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