Centrally planned economy

[ComradePonov]

Gentleman,


Our teacher usually assigns the teacher with a excerpt from a book, and we are required to analyse the excerpt and comment on its validity, or hte lack thereof, and suggest why it is true / false.


THis weeks excerpt was extremely interesting to me. I got it two nights ago, and I have been thinking about my response. However, I would appreciate input from anyone here who is a more educated Marxist than I.

Alas, here is the excerpt;



A centrally planned economy, as that adopted by the USSR, is intrinsically flawed because there is no way to deduce value of goods or services based on supply and demand as in a capitalist system. Observable then would be the improper distribution of resources, based not on supply and demand, but rather human analysis of the matter. This will inadvertently create surpluses and shortages, and corrective measures could only be implemented after the problem,not before. As we are aware it is preferable to fix a problem before, rather than after it occurs. In a short period of time this would not be a problem, however given enough time, this will grow rather than lessen, with distribution problems occurring more and more often as time goes on, with disastrous consequences.




Any sort of input is welcome. I shall post my thoughts when I have finished them tommorow or maybe tonight. I am still working on my response.

[Jose Gracchus]

Perhaps you could say that it is quite curious to suggest that health care and basic nutrition is "better distributed" in the Congo than in the "centrally planned" (though not really) USSR.

[Book O'Dead]

Gentleman,


Our teacher usually assigns the teacher with a excerpt from a book, and we are required to analyse the excerpt and comment on its validity, or hte lack thereof, and suggest why it is true / false.


THis weeks excerpt was extremely interesting to me. I got it two nights ago, and I have been thinking about my response. However, I would appreciate input from anyone here who is a more educated Marxist than I.

Alas, here is the excerpt;



A centrally planned economy, as that adopted by the USSR, is intrinsically flawed because there is no way to deduce value of goods or services based on supply and demand as in a capitalist system. Observable then would be the improper distribution of resources, based not on supply and demand, but rather human analysis of the matter. This will inadvertently create surpluses and shortages, and corrective measures could only be implemented after the problem,not before. As we are aware it is preferable to fix a problem before, rather than after it occurs. In a short period of time this would not be a problem, however given enough time, this will grow rather than lessen, with distribution problems occurring more and more often as time goes on, with disastrous consequences.




Any sort of input is welcome. I shall post my thoughts when I have finished them tommorow or maybe tonight. I am still working on my response.


Isn't capitalist economic activity already centrally planned by the individual capitalist or by a board of directors, CEO's, leading stock-holders, etc.?

[Kiev Communard]

A centrally planned economy, as that adopted by the USSR, is intrinsically flawed because there is no way to deduce value of goods or services based on supply and demand as in a capitalist system. Observable then would be the improper distribution of resources, based not on supply and demand, but rather human analysis of the matter. This will inadvertently create surpluses and shortages, and corrective measures could only be implemented after the problem,not before. As we are aware it is preferable to fix a problem before, rather than after it occurs. In a short period of time this would not be a problem, however given enough time, this will grow rather than lessen, with distribution problems occurring more and more often as time goes on, with disastrous consequences.




Any sort of input is welcome. I shall post my thoughts when I have finished them tommorow or maybe tonight. I am still working on my response.

Point out that the USSR's planning problem were not due to the planning process itself, but due to the lack of inputs from immediate producers and class antagonism between economic bureaucracy (who created the plans) and workers (who sabotaged them if they were contrary to their interests), so that the lack of information and its distortion made the planning highly problematic. Nevertheless, if the planning is carried out by associated producers themselves, this problem would not arise.

Plus you might dwell on the capitalist economy's disproportions and irrationalities, such as unemployment, financial crises, crises of overproduction in general, etc. to dismiss the spurious claim that capitalism somehow "balances supply and demand" (it does not).

[Tim Cornelis]

The excerpt implies the market knows beforehand supply and demand whilst a centrally planned economy does not.

There is ways to know supply and demand in a planned economy, see Kontorovich's theory.

I'm not allowed yet to posts links, but google: Calculation in-Natura, from Neurath to
Kantorovich

Which is not to say that a centrally planned economy is preferable, it is incredibly inefficient because it's centralised, not because it's planned.

[Jose Gracchus]

Point out that the USSR's planning problem were not due to the planning process itself, but due to the lack of inputs from immediate producers and class antagonism between economic bureaucracy (who created the plans) and workers (who sabotaged them if they were contrary to their interests), so that the lack of information and its distortion made the planning highly problematic.

I think one has to reserve a separate role from "high planners" for the enterprise and shopfloor management as such, which certainly had their own interests.

[Apoi_Viitor]

First off, the collapse of the USSR was not due to economic issues but national antagonisms. Secondly, empirical observation shows us that pretty much all previous communist states were far from inefficient.

Ex: http://charleskenny.blogs.com/weblog/files/russ6.pdf

Edit: When I have time, I'll add a lot more and deal with the crux of Hayek's "miscalculation" argument.

[Dimmu]

First off, the collapse of the USSR was not due to economic issues but national antagonisms. Secondly, empirical observation shows us that pretty much all previous communist states were far from inefficient.

Ex: http://charleskenny.blogs.com/weblog/files/russ6.pdf

Edit: When I have time, I'll add a lot more and deal with the crux of Hayek's "miscalculation" argument.

Exactly...

Also all capitalistic states have "planned economy".. They all talk about the "invisible hand", but in reality everything is planned.

[Jose Gracchus]

First off, the collapse of the USSR was not due to economic issues but national antagonisms. Secondly, empirical observation shows us that pretty much all previous communist states were far from inefficient.

Ex: http://charleskenny.blogs.com/weblog/files/russ6.pdf

Edit: When I have time, I'll add a lot more and deal with the crux of Hayek's "miscalculation" argument.

The USSR's fundamental economic model was in crisis since the 70s. However this had nothing to do with planning: http://libcom.org/library/paresh-chattopadhyay-marxian-concept-capital-soviet-experience

[Rafiq]

Gentleman,


A centrally planned economy, as that adopted by the USSR, is intrinsically flawed because there is no way to deduce value of goods or services based on supply and demand as in a capitalist system. Observable then would be the improper distribution of resources, based not on supply and demand, but rather human analysis of the matter. This will inadvertently create surpluses and shortages, and corrective measures could only be implemented after the problem,not before. As we are aware it is preferable to fix a problem before, rather than after it occurs. In a short period of time this would not be a problem, however given enough time, this will grow rather than lessen, with distribution problems occurring more and more often as time goes on, with disastrous consequences.





This is partly true.The problem being their reasoning.

[Apoi_Viitor]

So first off, here is the issue being presented: http://en.wikipedia.org/wiki/Economic_calculation_problem

To be honest, I actually have very little knowledge of Marxist economics, but I can tell you why (from a Keynesian point of view) his argument is wrong, or at best, that the free market also fails to satisfy his criteria. 1. In every instance, decision making within a market occurs under a system of limited knowledge/information. Individual actions have numerous effects, many of which are unforeseen by the subjects undertaking them. For example, in a time of economic depression, it would be rational to sell all the stocks you currently own. However, if every one does that, then... 2. Animal instincts. In time of economic prosperity (and even economic depression), people behave irrationally. They buy stuff they don't want / need, and they rack up large debts. If social security were to be privatized, a significant number of individuals would fail to save any money for retirement, because people are usually just looking for instant gratification.

Also, this is from a Marxist prospective and deals with the argument: http://reality.gn.apc.org/econ/hayek.htm

[Vladimir Innit Lenin]

Should probably also point out that the supply/demand equilibrium doesn't define intrinsic value, it defines exchange value, which isn't really it's value (it's worth), it is an exchange price.

Of course, that is probably more University and beyond level stuff, but it's still good to make the teacher look silly :)