To market, to market … or not?

by george_scialabba on May 29, 2012

The tedious thing about being a book reviewer is your obligation to be fair, thorough, and concise. You’re supposed to keep in mind that, quite possibly, all your readers will ever know about the book you’re reviewing is what you say in the review, so the poor author, who may have spent years writing the book, is to that extent at your mercy. You’re supposed to give a reasonably complete idea what’s in the book, not just what you found interesting about it, since you don’t know that what interests you will interest others. You’re supposed to put the author’s case in the most persuasive and plausible form, since she won’t get to reply in more than a few, inevitably inadequate paragraphs. You can’t just blather on, mentioning all the (often irrelevant) things the book made you think about and, in particular, dropping the names of other (often remotely) related books, just to demonstrate your cosmopolitan interests and vast erudition.

For all these reasons, a symposium like this is something of a holiday. There are lots of other people writing about the book, and one or another of them is bound to cover whatever you’ve left out. So much for thoroughness. The author gets to reply at great length, and commenters at moderate length, and someone will certainly seize the opportunity to correct anything you’ve misunderstood or misrepresented. So no need to worry overmuch about being scrupulously fair. And it’s the Internet – concision is unheard of, and blathering/showing off is practically the name of the game. Ha, ha—screw all those tiresome reviewerly obligations!

A couple of observations arising directly from Red Plenty, though, before wandering off into matters only indirectly related. If anyone out there knows of any writing remotely comparable to the astonishing description strung across pages 329-340 of the genesis of a lung cancer tumor, please share. Once every few years, this grizzled and jaded book critic comes across a few pages that cause the pupils to widen, the pulse to quicken, the amygdala to flutter. This was one of those occasions. There is plenty of extremely good writing in the book – the immediately preceding chapter, about giving birth, for example; or the little fixer Chekuskin’s venture into the banya, or bathhouse, where the local criminals are playing cards, in order to buy scavenged copper pipe from them; or the visit of a Komsomol delegation to an American exhibition in Moscow’s Sokolniki Park in 1959. But the cellular mini-epic compressed between the sad, quotidian events of a chapter called “The Unified System, 1970” is way beyond extremely good. I would be willing to follow up any number of recommendations from commenters on the long chance of encountering a few pages that gave me anything like as much pleasure.

Another thing you’re not supposed to do in book reviews is plug your friends. Well, screw that too. Because Red Plenty is about so many things – economic reform, the culture of academe, bureaucracy, Russian history – the portrayal of everyday life and character, though skillful, is episodic and will leave some readers unsatisfied. To those readers I recommend the stories of Ludmilla Petrushevskaya, one of the foremost fictional chroniclers of Soviet life in the decades covered by Red Plenty. Petrushevskaya’s stories are being translated into English by my good friend Anna Summers, and one of them appears in Baffler 19.

Red Plenty doesn’t have a plot, exactly, but the narrative thread with the most continuity and the highest dramatic tension concerns the efforts of mathematical economists to rationalize the vast, ramshackle contraption that was the USSR’s central plan. Once Khrushchev had publicly repudiated the worst excesses of Stalinist ultra-orthodoxy and police-state repression, the economists began speaking to Party leaders about ideas they had formerly only whispered about among themselves: in particular, “objectively determined valuations,” “shadow prices,” and even “enterprise profits.” They promised plenty, and plausibly, but at a cost: less Party control. At the climactic moment, while First Secretary Kosygin looks on, “tapping one set of dry fingertips against the other,” his aide challenges the economists’ spokesman: isn’t what’s being proposed essentially a market economy – the negation of Communism?

“No!” said Emil. “This would be an alternative to a market economy. The prices would represent genuine social utility. And calculating them would be well within the powers of existing technology. We have the software ready!

History seems to hang in the balance, but really, rejection is preordained. The First Bureaucrat taps his fingers a while longer and then speaks: “It’s a very pretty idea. Very clever. But not practical. Not a serious proposition.”

Whether it was a serious proposition – whether market and central plan could have been combined in roughly the way envisioned by the book’s protagonists – I leave to my fellow symposiasts. I would like instead to turn to a more recent and less historically significant debate, though one more relevant (I hope) to the American future: about the market vs. decentralized planning. David Schweickart, a mathematician and philosophy professor, is the author of Against Capitalism, After Capitalism, Market Socialism, and Capitalism or Worker Control? Michael Albert, co-founder of South End Press and ZNet, is the author (with Robin Hahnel) of Looking Forward, The Political Economy of Participatory Economics, and Parecon: Life After Capitalism. The latter book (full text available online: http://www.zcommunications.org/zparecon/pareconlac.htm), published by Verso, has had surprising success. It has been translated into 15 or 20 languages and  is the subject of numerous dedicated websites.

In 2006 Schweickart wrote a long, harsh review of Parecon. Albert, who evidently loves a good argument, posted Schweickart’s review on the ZNet website with a lengthy reply and invited a rejoinder from Schweickart, to which he again replied at length. The full exchange is at http://www.zcommunications.org/znet/zdebatealbertvsschweickart.htm. (I’ve only read scattered pages of Parecon, but I reviewed the two earlier Albert/Hahnel volumes at some length)

It’s a lengthy exchange, and it gets down to cases. In fact, Schweickart immediately gets down to a very extended case: he attempts to apply the Parecon model of “balanced job complexes” and “consumption bundles” to his own workplace, Loyola University, and his own everyday consumption. The necessary calculations – imagined in real-life detail, over many pages – are staggeringly complex. And this does not exhaust the difficulties. Wages, prices, and investments must also be decided on. Even if the deliberations involved were not prohibitively time-consuming, Schweickart claims, it is impossible to make such decisions in a non-arbitrary way without some measure of efficiency, like that provided by the results of market competition.

Albert concedes the difficulty, but not the impossibility. As he reasonably points out, doing anything for the second or fifth time is easier than doing it for the first time. After all, the costs of transition from craft production to industrial production were horrendous; the process was only accomplished through massive and prolonged coercion of the population by capitalists, managers, and the state. The costs of a voluntary transformation by a self-directing populace would be far easier to bear. If we can look past the difficulties, Albert urges, we will see a necessary egalitarian future that can be attained no other way:

Transition involves experimentation in job definition. It involves a flow of changes that give those doing only cushy and empowering work steadily more of the socially necessary but rote tasks, while giving some of their cushy and empowering labor over to those who were previously excluded. …

The point is, if you look down the road some years from when serious redesign in pursuit of balanced job complexes begins, balanced job complexes can be attained and, moreover, the people who work at the new Loyola can have had enriching education in their youth – rather than about 80% of them being taught mostly to endure boredom and take orders, and 20% being taught productive skills and also to feel superior. In the new Loyola, all who work there are equipped to participate cooperatively and equitably in balanced jobs, and a few will not dominate the rest. And the same goes for other workplaces. We don’t all do everything, of course. None of us do things beyond our capacities, naturally. We all, however, do some activity that is empowering and some that is not, in a socially balanced mix.


Albert’s egalitarianism is unyielding and deeply admirable. Schweickart is an egalitarian too – it would be a far less worthwhile debate if he weren’t. But, he counters, there are equally important values: privacy, most obviously, and the spirit of enterprise. Even more fundamentally, Albert’s “strict egalitarianism is morally problematic. It undercuts the generosity of spirit a socialist ethic should provide.”

Schweickart’s favored alternative, expounded in After Capitalism, is “Economic Democracy.” It has three elements:

  • Worker Self-Management: Each productive enterprise is controlled democratically by its workers.

  • The market: These enterprises interact with one another and with consumers in an environment largely free of government price controls. Raw materials, instruments of production, and consumer goods are all bought and sold at prices largely determined by the forces of supply and demand.

  • Social control of investment. Funds for new investment are generated by a capital assets tax and are returned to the economy through a network of public investment banks.

 

It all comes down to one’s view of markets. Schweickart and Albert agree that private financial markets must go; investment must be democratically decided on. But Schweickart insists that a market in goods and services is not a mere necessary evil, it is a positive good. Albert is implacable:

Markets aren’t a little bad, or even just very bad in some contexts. Instead, in all contexts, markets instill anti-social motivations in buyers and sellers, misprice items that are exchanged, misdirect aims regarding what to produce in what quantities and by what means, mis-remunerates producers, introduces class divisions and class rule, and embody an imperial logic that spreads itself throughout economic life.

Schweickart’s reply is eloquent:
Markets indeed have defects, but they have virtues as well. We need to think dialectically about markets. Markets are democratic (in that they respond to consumer preferences), and they are undemocratic (since they tend to exacerbate income inequality). Markets enhance the space of individual freedom (since consumer choices are not subject to the approval of others), and they contract the space of individual freedom (since market choices often have third-party effects). Markets provide incentives for constructive behavior (efficient use of resources, innovation) and for destructive behavior (consumer manipulation, disregard of ecological consequences). Neither market fundamentalism nor market rejectionism is an appropriate response to the reality of economic complexity.

This was also the conclusion of the late Alec Nove, a leading scholar of Soviet economic history, whose witty, incisive, altogether invaluable The Economics of Feasible Socialism is a book anyone interested in the themes of Red Plenty will want to read. Nove quotes a “doubtless sarcastic Soviet author” on the shortcomings of planning: “Mathematicians have calculated that in order to draft an accurate and fully integrated plan for material supply just for the Ukraine for one year will require the labour of the entire world’s population for 10 million years.” Nove then asks, unsarcastically:
 Is there then no possibility for democratic control over the processes of production and circulation? There most certainly is such a possibility, even a necessity … But first one must make clear that the democratic process will not be relevant to a wide category of microeconomic decision-making. Those responsible for making pumps will not vote about where they should go. The elected assembly at the center which will adopt a general plan for society will, of course, have neither the time nor the knowledge to concern itself with such a detail as pumps, let alone where any particular consignment should be sent (unless some scandalous situation arises which is brought to their attention). Otherwise, as Antonov wrote, next year’s plan will be ready in several million years.

Perfection, whether conceived as “optimization” or “equilibrium,” is a chimera. “All institutional arrangements carry with them advantages and disadvantages. … Competition has certain positive features: it is a consequence and pre-condition of choice; it also provides a stimulus, to the successful and laggards alike. … Similarly, central planning enables the planners to see the total picture, but at the cost of a loss of vision of detail. Decentralization means clarity at micro level, but at the cost that wider effects may remain unperceived. The best solution is bound to be a compromise.” This is Schweickart’s “neither market fundamentalism nor market rejectionism.”

Nove’s model of “feasible socialism” closely resembles Schweickart’s, with five levels of economic activity:

1)    State enterprises, centrally controlled and administered;

2)    Publicly owned (or socially owned) enterprises with full autonomy and a management responsible to the workforce;

3)    Enterprises owned and/or administered by the workforce (e.g., cooperatives, and other variants, employee shareholding, long leases, and so on);

4)    Private enterprise (subject to limits);

5)    Individuals (e.g., freelance journalists, plumbers, artists).


 

Investment would in general be publicly, democratically decided, though with a few more exceptions than Schweickart would allow. But unfettered private financial markets are out; to both writers it is obvious, as it must be to any thoughtful adult – there is some excuse, I suppose, for a thoughtful adolescent libertarian – that predominantly private control of investment is incompatible with a rational, humane society. To Albert’s ferocious hostility to hierarchy, Nove would reply that “it does seem likely that most human beings will continue to prefer to avoid responsibility and be glad to accept (appoint, elect) others to carry it,” but that there is all the difference in the world between accountable and unaccountable authority. As long as management in most enterprises is responsible to the workforce, there is no need to abolish professional managers.

By “feasible,” Nove explained in his introduction, he meant “a state of affairs which could exist in some major part of the developed world within the lifetime of a child already conceived.” No doubt Nove’s model, as well as Schweickart’s and even Albert’s, are technically feasible in that sense. But are they politically, psychologically, and morally feasible? Nove was writing in 1983, shortly after hundreds of millions of people had cast votes for Ronald Reagan and Margaret Thatcher. Not many of those people, or their children, seem to have learned much in the three decades since. The debates surveyed above will probably not be of practical relevance for quite a while: it will be a century or two, I fear, before the last Republican politician is hanged in the entrails of the last evangelical preacher.

So why are they worth having? Well, as Shelley wrote, the great instrument of moral good is the imagination. And imagination feeds on argument. Bellamy and Morris fed on Marx and Henry George; Ernest Callenbach fed on Paul Goodman and Lewis Mumford. Someone reading these arguments on ZNet or Crooked Timber may even now be meditating a utopian novel of a scope and beauty equal to theirs – or a semi-utopian fairy tale like Red Plenty. Perhaps we will feed her imagination.

{ 33 comments }

1

Russell Arben Fox 05.29.12 at 3:47 pm

George, this was a fine, thoughtful summary of at least a portion of the existing argument over the means of and possibilities for organizing markets along decentralist/anarchist/communitarian/democratic lines, as opposed to 1) replacing them entirely with state socialism, or 2) leaving them free to be dominated (and turned into weapons) by those with sufficient capital resources. Many thanks for it! The one important source regarding the Parecon idea which it occurs to me that you might have added was Erik Olin Wright’s measured arguments against it in Envisioning Real Utopias. I summarize some of Wright’s comments about Albert’s ideas here (basically, to the extent Albert’s Paracon is a “non-Marxist proposal that would seek to replace the market with a different form of economic participation entirely,” Wright has some deep reservations); Albert himself responds to Wright here. Anyway, just a way to stretch the conversation that much further.

2

The Raven 05.29.12 at 4:52 pm

How do Schweickart and Albert’s models differ from Keynes “Somewhat comprehensive socialization of investment” under a democratic government? Or are these all variations of the same basic thought?

3

Brad DeLong 05.29.12 at 5:39 pm

There is no such obligation: the only obligation of a book reviewer is to situate the book in the broader context of the reviewer’s own work, and then talk about what the reviewer wants to talk about…

4

L2P 05.29.12 at 5:56 pm

I just read the thread you linked to and you were dead on. Six posts telling the OP that going to either school was a terrible idea. Which is, of course, good advice.

But this is still heartbreaking. The OP is obviously excited about going to law school, informed enough to be thinking about which options might work out and planning tentative careers. That is infinitely more thought than most Ols put in back in the 80s, when you just went to school and, you know, got a job. But the OP is still looking at, best case, going to a mid-tier local school and maybe, if everything works out, being able to hustle for a break.

Somewhere things have gone horribly wrong when reasonably talented, hardworking people aren’t steered away from what is objectively a dead-end long before this.

5

Matt 05.29.12 at 6:47 pm

The Nove anecdote about planning the Ukraine has a close counterpart in “Ladies, Cover Your Ears!” within Red Plenty:

A beautiful paper at the end of last year had skewered Academician Glushkov’s hypercentralised rival scheme for an all-seeing, all-knowing computer which would rule the physical economy direct, with no need for money. The author had simply calculated how long it would take the best machine presently available to execute the needful program, if the Soviet economy were taken to be a system of equations with fifty million variables and five million constraints. Round about a hundred million years, was the answer.

The 1990 postscript to “Economic Calculation in the Socialist Commonwealth” has a similar proof-by-incredulity regarding the impossible complexity of planning:

Given, therefore, the infinitude of the relationships of complementarity and substitutability simultaneously subsisting among the various types of productive resources, a single human mind–even if it were miraculously endowed with complete and accurate knowledge of the quantities and qualities of the available factors of production, of the latest techniques for combining and transforming these factors into consumer goods, and of the set of all individuals’ value rankings of consumer goods–would be utterly incapable of determining the optimal pattern of resource allocation or even if a particular plan was ludicrously and destructively uneconomic. Not only would this perfectly knowledgeable person be unable to devise a rational solution of the problem, he or she would be unable to even achieve a full intellectual “survey” of the problem in all its complexity.

This all seems quaint and ironic now, like Grandpa Simpson dismissing an idea because mules aren’t strong enough or women will never get the vote. Ludwig von Mises (though not his modern followers) can reasonably be excused from noting a non-market solution to economic calculation problems, as he was writing in 1920. The Soviet pioneers of Red Plenty likewise have good reason to use “shadow prices” instead of direct calculation, given their near-term technological constraints. But today it is inverted: solving problems by computer that would require billions of years with pencil and paper is routine, ubiquitous, no more remarkable than substituting the mechanical power of billions of human biceps with hydroelectric dams and motors. It is political dedication to non-market arrangements that seems amazingly distant and utopian now.

6

Pascal Leduc 05.29.12 at 7:06 pm

Isaac Asimov had a series of stories based around a period of time where the human economy (and thus humanity as a whole) was ruled by Multivac, a mountain sized computer. If I recall, it eventually engineers its own destruction as it comes to realise that it has an overall negative effect on human society which has grown unambitious and uncreative under its rule.

Another science fiction story yet again posited a world run by a computer. The protagonist eventually escapes from the stifled society. Later on he organizes an attack on the mountain sized computer only to discover that the computer is a lie and society is actually ran by a bunch of perpetually young hedonists who use the computer as a cover story, (he rebels against them also).

7

J. Otto Pohl 05.29.12 at 7:09 pm

A lot of the proposals in this post look like Tito’s Yugoslavia after he introduced considerable economic decentralization. But, the Yugoslav economy had a lot of problems and standards of living never reached that of what are now EU countries. In fact like even poorer countries to its south and east, Yugoslavia’s economy became heavily dependent upon remittances from workers in what was then the EEC. Also while far more liberal than the USSR, Yugoslavia was still a state that imprisoned dissidents. I don’t want to rehash the Hayek debate. But, I do not think that any democratic government could institute an economy as socialized as Yugoslavia’s. Historically, a much more rigid system existed in Yugoslavia in the immediate post-war period which was liberalized from the top down economically while maintaining centralized political control of the LYC. When this centralized political control became decentralized the state broke apart along ethnic-territorial lines. The richer northern republics of Slovenia and Croatia in particular resented subsidizing the poorer southern regions Macedonia in the name of socialist equalization.

8

William Timberman 05.29.12 at 7:28 pm

Brad DeLong, Paul Krugman, and Mark Thoma have all recently said something like: We KNEW what to do, but we didn’t do it, and I can’t for the life of me understand WHY we didn’t do it. Krugman has lately offered some bumper sticker-style speculations on why we didn’t do it which suit the form he’s restricted himself to, i.e. the earnest address to non-experts. I don’t blame him for this, as I’m sure his private thoughts and those of his like-minded colleagues are much more sophisticated. Some of us, myself included, have half-heartedly waved Marx’s bloody shirt at them, claiming to know the why that they claim not to know. In a very real sense, though, this is intellectual commedia dell’arte. They know what we know; they just aren’t persuaded that it adds up to anything worth pursuing in the real world.

I think it is. In particular, I’m not sure that they actually did/do know what to do. The mathematics that seemed so predictive to so many of their colleagues, and which even they still rely on with supposedly much cleverer caveats, may be as mistaken as the dreams of the cybernetic technocrats of Red Plenty. From my perspective, that’s precisely what makes Red Plenty as astonishing as George says it is, and much more valuable to us than its grace as a novel would suggest.

This is cost/benefit analysis at a deeply human level, the me culpa of the well-meaning, though mistaken, to the accusations of Solzhenitsyn. If we want to reform the politics of our own we-know-what-to-do-but-we-can’t-seem-to-get-it-together before it’s as too-late for us as it was for the Soviet bureaucracy, it would behoove every one of us to look at our own system through the lens that Spufford has so conveniently brought to bear on the now vanished Soviet Union.

9

ezra abrams 05.29.12 at 7:28 pm

As Galbraith remarks, there is utility to reviewing books – it makes reviewers of your own book stop and think before they write something critical (of course, G puts it much more nicely then I do)

10

Colin Danby 05.29.12 at 8:33 pm

Raven, I read Albert as making a strong argument against any markets, partly on the grounds — “instill anti-social motivations in buyers and sellers” that they are morally corrupting *even if they work well*. This is an echo of the Romantic critique of political economy exemplified by Carlyle and Ruskin, though Albert surely doesn’t share the rest of their politics. Schweikart, by contrast, is making a more familiar mixed-economy argument that, at a certain level of generality, is widely shared – public investment for some things, private for others. Keynes was somewhere in there.

_Red Plenty_ introduces a distinct argument about the politics of markets, nicely put in the lesson Mokhov draws on page 301: “Money will never be allowed to have the last word here.”

11

Colin Danby 05.29.12 at 8:45 pm

Just to toss a couple more texts in, Keynes’ 1925 “A Short View of Russia” and Walter Benjamin’s 1927 “Moscow” make related points about markets and power, both based on short visits to the USSR. Benjamin is a particularly interesting to read in juxtaposition to _Red Plenty_.

12

Maynard Handley 05.29.12 at 10:08 pm

I have to admit, when I look at debates like this (eg that between Schweickart and Albert) it seems to me that all protagonists are wasting their (and our) time by considering the easy cases. The issue at hand is: how much do we owe each other? And a useful answer (not to mention one with any relevance to real politics) has to answer this question.

The questions I give below are not easy to answer, and any realistic answer will involve some fudging. But answering them is where the rubber meets the road, not some easy-to-agree upon statement that we all think billionaires should help their societies a little more; or an agreement that REASONABLE people can work things out — of course they can, the problem is always what to do about the plenty of unreasonable people in the world.

For example:
– how much (in real dollars and real effort) do we owe those dying after a long life?
– how much (in real dollars and real effort) do we owe those dying after just being born?
– how much do we owe those who voluntarily decide to bail out of society and live inside a crack pipe/bottle/syringe?
– what if I decide I still like the bailing out of society and doing my own thing part, but don’t care for the crack pipe/bottle/syringe part and would prefer to replace them with a library? or a TV set?
– do we owe everyone support and even encouragement to have as many kids as they like, in spite of the fact that this is clearly an unsustainable policy?
– does that support even extend to vast efforts and dollar amounts for fertility treatments? Or to supporting and encouraging births that we are pretty damn sure will result in handicapped children?

You can avoid these questions on the grounds that raising them empowers the enemy (a theory that was used, rather successfully, to silence communists critics throughout the late thirties and early forties); but refusing to grasp them and come up with answers, which can then be judged as reasonable or not, has, IMHO, more than anything, encouraged the rise of libertarianism and a frustration with the welfare state across the entire modern world.

13

Maynard Handley 05.29.12 at 10:24 pm

“The Soviet pioneers of Red Plenty likewise have good reason to use “shadow prices” instead of direct calculation, given their near-term technological constraints. But today it is inverted: solving problems by computer that would require billions of years with pencil and paper is routine, ubiquitous, no more remarkable than substituting the mechanical power of billions of human biceps with hydroelectric dams and motors. It is political dedication to non-market arrangements that seems amazingly distant and utopian now.”

I think obsessing about shadow prices (or “real” prices) as a computational mechanism is a dead end. The issue is not the prices per se, it is enforcement mechanisms. As I said in another post, the plan does not enforce itself.

Prices in a capitalist system aren’t JUST Lagrange multipliers; they have real world consequences for people’s lives. If you remove these consequences, then the prices no longer have much value — why not ignore them or lie about them? The point is — other parts that make capitalism work include contracts stating who will do what for a price, courts which enforce these contracts, laws prohibiting fraud (I can’t claim to sell you an iPod at this price and give you a cheap knockoff), laws prohibiting theft (why care about price if I can simply steal something), laws enforcing fines (“true prices”) for externalities, etc etc.

You can’t just talk about the prices without talking about these enforcement mechanisms; but the Red Plenty economists seemed to have no interest in them. They were, I assume, from real life aware of the lies throughout the economic production system, lies with no consequences; and of the production of substandard goods, with no consequences; but were unwilling to see the larger picture, that their grandiose scheme was meaningless without these political backstops.

[And, once again, thanks Word Press for totally fscking up the formatting in my previous post.]

14

Doctor Memory 05.29.12 at 10:27 pm

Matt (@, currently, #5): as a professional in the field, I would warn against easy optimism about the applicability of current computing power to a complete solution to these problems. We can, to be sure, computationally solve many more interesting problems now than in the 1940s and 50s– orders and orders of magnitude more bits can be flipped per microsecond, and that is all to the good. But there remain profound limitations on that, and there are entire classes of problems that would remain unsolveable within the expected lifespan of the universe even if we somehow converted every atom on planet earth into a transistor. I don’t know if any serious effort has been made to classify full-scale economic allocation as NP-complete or not, but it would not even slightly surprise me if it were.

15

Henry 05.30.12 at 12:54 am

Matt – Cosma Shalizi has a humdinger of a post coming up in this seminar on just this topic. Short version – Doctor Memory’s misgivings are for better or worse entirely warranted.

16

Matt 05.30.12 at 1:12 am

Of course there remain and will always remain many optimization problems that are intractable in practice. But the specific example of an impossibly hard task given in Red Plenty, a linear programming problem that would have taken 100 million years to solve with mid-1960s Soviet computers, seems much less daunting today.

Like Maynard Handley, I suspect that the academic planners’ dream in Red Plenty or similar plans that we might conceive of today would run into considerable problems other than pure information processing. But at least that conversation is a step beyond “the problem is too complicated to solve even with perfect information, so don’t bother inquiring any further.”

Hayek has a related but distinct argument against planning in “The Use of Knowledge in Society,” claiming that too much critical productive knowledge is dispersed among people and places. A central planner has no way to quickly gather all this information and react to changing circumstances, or to quickly distribute changes in the plan all the way down to “the man on the spot.” Today I would use the past tense: a hypothetical central planner once had no plausible mechanism for that rapid and ubiquitous communication. Are economists or political scientists interested in revisiting economic planning in light of vastly increased capabilities in computing and communications? How does a large industrial enterprise like General Electric or Toyota today manage its internal planning and interactions between different parts of the firm?

17

Matt 05.30.12 at 1:12 am

(Note first that I’m not that “Matt” above, but the one who has been hanging around these parts for many years.)

For those who want to understand this stuff, let me double the recommendation of Nove. He’s readable and extremely fair. He’s a socialist, but has no illusions about it. Both _The Economics of Feasible Socialism_ and his _Economic History of the Soviet Union_ are great. (I have read a little of his _The Soviet Economic System_, which is more technical, but haven’t had the time to get far into it.) Even as late as the late 90’s, Nove was extremely useful for understanding why, for example, Russians tended to have large, heavy furniture in their very small apartments.

18

John Quiggin 05.30.12 at 1:37 am

I also recommend Nove

19

gordon 05.30.12 at 2:25 am

Central planning versus market prices again, eh? Haven’t we been here before? Gee, the Cold War really does cast a long shadow, doesn’t it? Or could it be that the idea of market prices is really, really useful to our current oligarchs?

I suspect that Matt (at 16) is right and the computational constraints aren’t really so bad. Maybe we could look again at the cybernetic approach to managing variety that Stafford Beer and others pioneered back in the 70s. Maybe we could try doing it without all the kooky neologisms this time.

20

DrJim 05.30.12 at 4:14 am

Lots of interesting stuff here. Are you also going to review the book?

21

geo 05.30.12 at 4:35 am

Gordon @19: Central planning versus market prices again, eh? Haven’t we been here before?

We have indeed, which is why Schweichart and Albert are debating decentralized planning versus the market. Albert is very well aware that central planning failed.

22

Doctor Memory 05.30.12 at 4:37 am

First Matt: the problem is, even if you assume away the hard questions like “does linear programming at any physically achievable scale actually provide an adequate model for resource allocation?” and “did the scale of the LP problem described in ‘Red Plenty’ actually suffice to properly allocate all resources for the area it purported to cover”, you still face the ugly fact that even multiple orders of magnitude improvements only chip away so much at cosmic timescales: even assuming we can solve the same problem 10,000 times more quickly, we’ve reduced the solve time to a mere 10,000 years, which is impressive from a theoretical standpoint but not so much versus the human lifespan. Bluntly, if you want to convince anyone to give up the price system, the benchmark you are trying to beat is “instantaneous.”

(Then you’ve got the small problem that as the era of Moore’s law has slowly drawn to a close, we’ve been getting most of our computational speed gains via incredibly naive parallelism, and only certain subclasses of LP are in any way amenable to parallel processing — which is why it may not be safe to assume that if we’ve decreased the solve time by N orders of magnitude in the last 40 years that the next 40 years will produce another N-fold decrease…)

This is one of those areas where I would be seriously delighted to have someone prove me entirely wrong, but holding my breath seems ill-advised.

23

Walt 05.30.12 at 4:44 am

Doctor Memory: I’m pretty sure that the model they have in mind is linear programming, which is eminently solvable using today’s computers. Whether this is a plausible model of economic allocation is of course the subject of vigorous debate.

24

Walt 05.30.12 at 4:47 am

Oops, I missed that Matt already clarified.

25

Bruce Wilder 05.30.12 at 5:17 am

I’ve done linear programming models, and it is not that computationally intensive, even for fairly large systems. But, people always think that the computer is going to spit out “shadow prices” and we will all then know what to do: the computer will have told us. But, that’s not what happens in the end; the computer doesn’t answer the critical, values-laden strategic questions, and doesn’t tell anyone what to do. At best it outlines the possibility frontier, given present endowments, and points to a static solution. And, it turns out no one wants or needs a static solution — what’s needed is a strategic, dynamic solution. They want a plan, alright: a visionary, strategic, dynamic plan: a values-laden leap into the future. And, that a computer will never spit out. It doesn’t even help that much in framing. Sometimes, people think that if they just feed the computer some conjectural variations — what if we invest in one more widget painting station? what if we expand the widget baking oven capacity by 10%? — then, finally, the computer will tell them what to do. That’s how you get to 4 million years of planning.

Allocational efficiency is just not very important, let alone all important. Look around, and you will see business bureaucracies holding “market” price fixed and constant, or varying it according to fixed plans.

It isn’t a question of the primacy of local information. There are lots of questions, which can not be answered technically and correctly on the basis of purely local information and experience. The doctor examining you cannot diagnose you or prescribe a course of treatment, based solely on his own experience — or she can, but that’s going to be some lousy medicine. The problem is that the consequences cannot be observed and interpreted, based solely on the one, noisy case. The doctor, and every other specialist in whatever field, follows rules, and the rules multiply, and no one likes all the damn rules.

The primary economic problem, addressed by hierarchies, is controlling production processes, to reduce error and waste; that entails cybernetic control, which means a model of the process and learning from feedback, aka errors. It is a problem of dynamic learning, some of which is necessarily centralized, and sunk cost investments and those damn errors, which carry risk. The distribution of risk becomes the distribution of income, and whatever the rules are, strategic behavior follows to modify the rules, to separate the income from the risk, and more strategic behavior (politics!) to realign income with risk, and on and on.

Solving the allocational efficiency, which can be addressed by markets and market prices, isn’t very important, because the allocational efficiency problem isn’t very important, by itself. It’s the technical efficiency problem and distribution of risk, which will kill you — literally, if you get it wrong. And, that feedback and modeling problem actually does benefit from centralizing information flows to some, critical extent.

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Latro 05.30.12 at 10:20 am

#16 I would not make that claim without research. My times as a computer science student are long past, but problems that took 100 million of years in the 40 may very well have advanced to taking 10 million years right now.

If your problem can only be solved by an algorithm that is of O(N^2) nature, that is, time of execution depends on the dataset size squared, it just take small increments of the dataset to put you into an long time to wait for the answer. You may have your answer for N=100 in a reasonable time. N=150 (you opened 50 new factories, for example), already more than duplicates the time. N=200 makes it 4 times longer.

And that is an easy one. If your algorithm is O(2^N), that is, the time to run it grows as the N power of 2… you are screwed. Every single increment in the dataset size means 2x the time to solve it. In no time you are getting into wait for the dead of the universe territory.

And we are talking about something that pretends to model the whole economy of a superpower at the “how many nails should I produce in nail factory #21 production line #3”.

27

Neville Morley 05.30.12 at 1:22 pm

This comment may (i) be completely off-topic, though it was inspired directly by reading this piece and some of the comments, and (ii) much too ignorant of the history and present state of computing, but anyway… Much of the fascination in Spufford’s book, for me, comes from the implicit counterfactuals, but it’s become clearer to me how far there are several different sorts interacting with one another. Most obviously there’s the ‘how could things have been different?’ counterfactual centred in the past: what if the USSR had adopted the economists’ proposals? But there is also a past-present dynamic: given that (arguably) we now have far greater technological resources at our disposal, could we now do what they were unable to do (or unable to risk trying)? In other words, we’re encouraged not only to draw on our knowledge of what actually happened in the end with what could conceivably have happened, but also to turn our new knowledge of how things could have been in the past back onto our own future. It reminds me (and this may well be deliberate) of the way that old TV science fiction series offer both a nostalgia for the way the future was once imagined and a reproach against the present for having failed to achieve this.

28

Walt 05.30.12 at 2:11 pm

26: This isn’t a matter of speculation. CPLEX on a big computer can solve problems with millions of variables, and millions of constraints.

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J. Otto Pohl 05.30.12 at 2:11 pm

While people are on the subject of recommending the works of the late Alec Nove I would put in a plug for a short work he wrote with J.A. Newth in 1967, _The Soviet Middle East: A Communist Model for Development?_. It still holds up as the best book written on the economic relationship between Moscow and Central Asia even today. They concluded that the Soviets managed to greatly develop the region and raise its standard of living by a large net transfer of wealth from richer areas of the USSR. This accounted for the fact that these areas managed to economically overtake neighboring areas like Iran, Turkey, Afghanistan, and Pakistan.

30

Latro 05.30.12 at 3:24 pm

28 Well, the wonderful informative new entry here that I have no time to read fully explains it better than me :-P

“A good modern commercial linear programming package can handle a problem with 12 or 13 million variables in a few minutes on a desktop machine. Let’s be generous and push this down to 1 second. (Or let’s hope that Moore’s Law rule-of-thumb has six or eight iterations left,and wait a decade.) To handle a problem with 12 or 13 billion variables then would take about 30 billion seconds, or roughly a thousand years.”

Yes, nowadays we can do linear programming with “12 million variables”. But, its the problem of managing the economy now a “12 million variable” one?

“No. The difficulty is that there aren’t merely 12 million variables to optimize over, but rather many more. We need to distinguish between a “coat, winter, men’s, part-silk lining, wool worsted tricot, clothgroup 29—32” in Smolensk from one in Moscow. If we don’t “index” physical goods by location this way, our plan won’t account for the need for transport properly, and things simply won’t be where they’re needed; Kantorovich said as much under the heading of “the problem of a production complex”. (Goods which can spoil, or are needed at particular occasions and neither earlier nor later, should also be indexed by time; Kantorovich’s “dynamic problem”) A thousand locations would be very conservative, but even that factor would get us into the regime where it would take us a thousand years to work through a single plan. With 12 million kinds of goods and only a thousand locations, to have the plan ready in less than a year would need computers a thousand times faster.”

So while the algorithms are not so bad in terms of time (they are polynomial), the problem seems to grow and grow and grow all the time. The more your economy grow the worse your planning is. The more you want detail, the worse the time to get the plan comes. As it is polynomial you have the hope that “soon” you will have the computing power to do it (Moore’s Law, distributed computing, etc), but it keeps growing so it is very well conceivable that the day you can run last year plan in less than a year, you need the computer power of several years in the future to do today’s plan.

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MQ 05.30.12 at 4:40 pm

Bruce Wilder @ 25 is an excellent and very important comment. The entire allocational efficiency problem is secondary to the incentive and coordination problems associated with extremely imperfect information. This is true in both capitalism and socialism.

I have not read ‘Red Plenty’ but I was wondering if the book dealt with the actual ‘red plenty’ of the 1950s. From the perspective of the 1950s the central planning experiment must have looked quite successful. There are few other examples of societies going from literal cannibalism (in the late teens/early 20s) to large-scale industrialization within one generation. Have any objective studies been done attempting to estimate the economic growth rates in the Soviet Union over, say, the early 20s to the early 60s? They must have been very high.

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Latro 05.31.12 at 8:36 am

MQ, it does. It is, in fact, the whole start of the book, almost. The fantastic rate of growth of the Soviet Union as a credible threat to beat capitalism at the game of providing for the people.

The rest of the book is about how it didnt and why.

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J. Otto Pohl 05.31.12 at 12:04 pm

MQ:

Cannibalism in the USSR existed a lot later than the 1920s. There are quite a few verified cases of cannibalism in Ukraine in 1932-1933 and among Soviet POWs in German captivity during WWII. I am not sure if there are any verified cases for the 1946-1947 famine. But, certainly eating people who had already died of hunger related causes was not an unheard of survival strategy in Ukraine during 1932-1933 which is during the first five year plan.

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