"The Soviet Union followed an economic model..

[Habash]

..outlined by Karl Marx in books like Das Kapital, which he himself could not mathematically close. This explains the failures of market alternatives. Markets have been proven to be the best way to organize resources."

Says my econ professor.

Everyone in class nods in agreement. This is graduate school.

Not sure how to respond to something like that.

Input?

[Drosophila]

Marx's Capital isn't some blueprint for a future society. It's exactly what the title suggests, a critique of capitalism. Your professor is an ignorant ass.

[ÑóẊîöʼn]

Have you asked him what the model actually was?

[ComradeOm]

Here's a very old post (http://www.revleft.com/vb/command-economy-t62485/index.html?t=62485) on the theoretical efficiencies of the planned economy. Not my words

It's also worth noting that this vogue for the market is relatively recent. Almost all the post-war booms or economic miracles in Europe and Asia were driven by states that were heavily involved in the organisation and allocation of economic resources


-----

In principle, central planning should be as efficient, if not more efficient, than a free market system. It doesn't have the drawbacks of built-in periodic crises ('business cycle'), with all that attendant unemployment or inflation, it doesn't have the inherent inefficiencies of private monopolies and their artificial scarcities nor is it tied into particular specializations which may stunt long-run growth.

A central planner can (in theory) achieve an economy that is more efficient, more just and with faster growth than the free market. The question is whether it does. And here, the answer is usually no.

In practice, Soviet Russia achieved some degree of success on all three fronts (no unemployment, strong growth), but it also achieved some overwhelming and devastating failures (severe misallocations, famines, etc.)

The big monkey wrench in central planning was (and is) inadequate information and politicization.

To give an example, let's say you want to increase the nation's agricultural productivity by introducing tractors to all farms. In a free market system, buying a tractor may not be profitable for a private farmer - maybe grain prices are not good enough to overcome the purchase price of a tractor, maybe the scale of his production is too small to justify it, maybe the financing is too expensive, maybe there are cheaper labor-based alternatives, etc. At the same time, the price of tractor may be too high for the farmer because tractor producers are facing expensive steel prices, or have problems attracting skilled labor to their tractor factories, or just don't feel good about the size of the market and didn't invest in expanding their tractor plants, etc.

Unless the market conditions are aligned rightly, the farmer will not buy a tractor. And, unless the government intervenes with some sort of lures and incentives (e.g. depreciation allowances, manipulating interest rates), that's the end of the story. Farms will not have tractors. Agricultural productivity will remain low.

In a central planning system, you don't need to wait for conditions to be right. The central planner can just cut through the knot and order the tractor factories to produce X tractors, give them the necessary steel, allocate the necessary labor, undertake the necessary plant expansion, and then transport the finished tractors to all the farms. Farms will have tractors. Agricultural productivity will now rise.

The problem is coordinating all that. Do you know how much steel you have available and what are the other demands upon it (ship-building, car manufacturing, etc.)? Are you allocating it between those industries properly? Is the labor that you're allocating enough/too much? Is the plant expansion to large/too small? And then to the farms, how many tractors per farm? Did you provide tractors but forgot to provide sufficient fuel to run them? (How much fuel? What other industries need the fuel?, etc.)

As you can see, the informational needs and computational elements add up quickly to a monstrous calculation problem. And you can make tremendous mistakes. You may end up with far more tractors than you need, or have fuel to run, or too few, etc. Lots of waste can happen.

Happily, during the 1940s & 1950s, Gosplan got better and better at it, and started producing some tremendous computational models of the entire Russian economy and new mathematical tools to calculate the most efficient way to allocate the resources. They were so good at it, that the same models were adopted in the US to help government economists estimate the progress of the US economy. They even got a couple of Nobel prizes for it.

The problem, naturally, was that the whole process quickly became politicized. So even if the planners figured it was most efficient to allocate steel to produce 100 tractors this month and the rest to ships and railways, that meant nothing if Comrade Stalin was on an agro-kick and wanted to ratchet the production of tractors to 500, even if that contradicted his ultimate target. The end result is that tractors ended up rusting in the fields while there wasn't sufficient railways and ships to transport the resulting grain. The cities starve for bread while grain rots in the barn.

The input information was also distorted and politicized. Anxious to get his steel quota, manager of Tractor Factory No. 3 exaggerates his need for steel. So does the manager of Shipyard No.5. Since the allocation is based on this erroneous reported information, not even the best computational models will get it right. Again, misallocations.

Then tack on the fact that the manager of Tractor Factory No. 3 has better connections in the party than the manager of the Shipyard No. 5, and the planning models stop to matter at all. We all know who will be getting the steel.

A sad footnote to all this, is that even the best and most efficient computation models used by Gosplan professionals were under constant attack for not being 'politically correct' and had to be adjusted, twisted, buried under piles of nonsense and doo-doo, to make them palatable to the luminaries of the CPSU and their manager friends. By the 1970s, they practically gave up being serious about it altogether and just started asking the party to decide for them.

And, oh, to add one final point: there was one manager who was always f***d over in all this, the one with absolutely no connections or voice in the party, no input into the planning process at all: the manager of Consumer Factory No.1 - the average Soviet citizen.

That is the principal drawback of the central planning. Too disorganized, with no 'manager' or advocate to represent them in the hierarchy, the consumer's 'needs' were always put at the back of the priorities.

That was the perennial problem of Soviet Russia from the very first day to the very last: everybody was employed, yes; everybody received a decent wage, yes; everybody had access to generous healthcare, retirement pensions, yes. But all that meant nothing if there was nothing to buy. This 'wage-goods' gap was the gnawing constant of Soviet life.

The need to break the red managers' control over allocation decisions, to give consumers a voice in the process, was the high principle behind Gorbachev's 'perestroika'. It ended disastrously.

[Yuppie Grinder]

Your professor is plainly wrong. Capital is a critique of political economy. It is not a blueprint for a socialist economy. Marx was a social scientist, not a prophet or architect of utopias.

[Danielle Ni Dhighe]

I doubt your professor has read the book in question, or he figures no one else did.

[Lowtech]

..outlined by Karl Marx in books like Das Kapital, this is an attempt to falsify without researching the large contrast between Lenin/totalitarianism and Marx/communism
which he himself could not mathematically close. challenge him to show MATHEMATICALLY how profit is anything more than a mechanism to retain value, aswell as ask him to justify a plutocratic class; a class that consumes more than it produces
This explains the failures of market alternatives. Markets have been proven to be the best way to organize resources. " organizing resources based on what's most lucritive to the rich is hardly proper organization. mass producing a few predetermined models of chairs, stacking them on a shelf and hoping people will buy them is not proper organization of resources,


Says my econ professor.

Everyone in class nods in agreement. This is graduate school.

Not sure how to respond to something like that.

Input?

Tell him capitalism retains value for the few via transfer of scarcity. The rich reduce the scarcity of resources they experience by increasing scarcity of resources artificially for everyone else; essentially, when you sell above production cost (at a profit) you are using the profit mechanism to retain value produced by others. Effectively making resources more expensive for everyone else.

The only capitalist justifications for this are based on how a capitalist feels about economics and his condesencion of other humans; regardless of his opinion and social constructs of ownership and 'market's, capitalism is incapable of mathemantically validating the consuming of more value than you produce, causing concentration of resources.

Here are some responses to generic capitalist contentions

Rich create jobs
-need creates jobs

People require incentive to work
- people are verywell capable of understanding the merit of their deeds without incentive or money

[RedMaterialist]

..outlined by Karl Marx in books like Das Kapital, which he himself could not mathematically close. This explains the failures of market alternatives. Markets have been proven to be the best way to organize resources."

Says my econ professor.

Everyone in class nods in agreement. This is graduate school.

Not sure how to respond to something like that.

Input?

1. stock market crash of 1929
2. recessions 1938, 1948, 1957, etc. (you can check the Fed Reserve of St Louis for the graph showing the shaded areas for recessions.)
3. the great recession of 2008.
4. failure of the market to allocate labor resources, real unemployment is still
prob at 15%.
5. capitalism has been temporarily saved by govt intervention in the market: war spending, manipulation of interest rates, bank bailouts,
6. the markets allow huge monopolies to form, microsoft, exxon, chase, walmart. does your professor suggest govt intervention in the markets to break up these monopolies?

If your class is at a public university then your professor is a direct recipient of money from government intervention in the free market of education.

If your professor uses the GDP as an economic indicator of the health of the economy, then he/she accepts the fact that government spending is a factor of production in the modern monopoly capitalist economy. Your professor accepts all the benefits of Keynesian market intervention without accepting responsibility for that intervention. He is as free market hypocrite.

[Habash]

Really good responses here. Class is tomorrow at 8 am and I'm going to load up my tank with as much fuel as I can get.

I already knew of most the arguments here, but I cannot put it as eloquently as you guys have. Please keep it coming! Also, I want to make sure that what I say not only responds to his claims, but is also understandable to the average sheep of my 200+ class.

[Ocean Seal]

..outlined by Karl Marx in books like Das Kapital, which he himself could not mathematically close. This explains the failures of market alternatives. Markets have been proven to be the best way to organize resources."
1. Karl Marx never postulated an economic model in Das Kapital.

Markets have been proven to be the best way to organize resources."
Almost half the world - over three billion people - live on less than $2.50 a day (http://www.globalissues.org/article/26/poverty-facts-and-stats)
Yep sounds like a great method of resource organization.

[Habash]

We're supposed to discuss the two-sector model if that's of any relevance to this thread

[ComradeOm]

In the context of development economics and the transition from subsistence to industrial economies? The Lewis model and all that>

If so, that makes your professor's comments even stranger. Heavy state intervention and direction are a prerequisite for industrialisation precisely because the market has proven incapable of allocating resources for this purpose. I can't think of a single country (with the possible exception of the UK) that has industrialised without a heavy dose of dirigisme. Why? Because the profit motive alone is not sufficient in itself to raise society to that degree

The most obvious, and relevant, reason for this being the existence of trade dependency loops. Particularly so in today's globalised world but these are as old as capitalism itself. How can capitalists in, say, Africa accumulate sufficient capital in the face of competition from cheaper Western sources? In terms of the dual-stage model this would be a case for raising agricultural wages (in exports to the West) while suppressing the ability of capitalists to offer an attractive industrial wage to attract labour. Cutting that knot - whether by sheltering nascent industries from competition or directing foreign capital into specific areas - requires deliberate policies on the part of the state

This is one area where the ability of a planned economy to perform is unquestioned. Industrial transformation was the big selling point of the Soviet model back in the day. Admittedly, the Soviet experience was horribly wasteful and in hindsight not something to emulate but it did provide a route out of subsistence agriculture. Something that cannot be said for the market alone

[Lowtech]

Really good responses here. Class is tomorrow at 8 am and I'm going to load up my tank with as much fuel as I can get.

I already knew of most the arguments here, but I cannot put it as eloquently as you guys have. Please keep it coming! Also, I want to make sure that what I say not only responds to his claims, but is also understandable to the average sheep of my 200+ class.

Forgive me if the following comment is too radical for orthodox economics courses, and please correct my grammar when necesary, but...

The economy is a public utility who's intended purpouse is to sustain a civilization.

I'd suggest to develop responses to the general contentions of capitalists similar to responses toward creationists you would find at talkorigins website.

Essentially, keep bringing the conversation back to the current, blatant example of "capitalism" we have today; make him defend things like the existence of the putocratic class, point out that the mathematical distinction the plutocratic class has versus everyone else is that they consume more than they produce.

A powerful thing aswell is anything regarding supply and demand are NOT fundimental to economics because economy does not require a market.

Also, demand in a market does not equate to need. being that a market economy ignores need anyway, as commodities are produced for exhange value. Instead, demand is stimulated exchange value created by comercialism/marketing.

I would imagine someone very good at apoligetics for capitalism would keep trying to tie you up with market dynamics or protecting the freedom of entrepreneurs and insisting incentive is required to motivate work

Just remember these key points: market dynamics are a problem exclusive to market based economics - how capitalists FEEL about economics does not dictate the physical processes of economics - and humans are smart enough to understand the merit of thier deeds without money or any other form of incentive - lastly, the rich/elites/plutocratic class consume more than they produce and not only is this economically invalid, this is all mathematically observable (via the profit mechanism/artificial scarcity/concentration of wealth/poverty)

[Habash]

Usually the typical response I get is "what do you suggest we do instead? Follow the soviet union model of central planning? Look what happened to them." or my favorite "give me a case where an alternative method of organizing the economy succeeded and was sustainable. You can't! Therefore, markets, although they have their shortcomings, are the best way".

I literally get these two ALL THE TIME.

[Workers-Control-Over-Prod]

Two questions mister professor:
1: Why did the Soviet Union achieve the fastest industrialisation in world history, why did communist East Germany have double the growth rates than capitalist West Germany?
2: Which pages of 'Capital' are you referring to, i fear my 992 page version may not have included these illusive imperfect mathematic models of Karl Marx

[RedMaterialist]

Usually the typical response I get is "what do you suggest we do instead? Follow the soviet union model of central planning? Look what happened to them." or my favorite "give me a case where an alternative method of organizing the economy succeeded and was sustainable. You can't! Therefore, markets, although they have their shortcomings, are the best way".

I literally get these two ALL THE TIME.

You might try the examples of sweden, norway, denmark, etc. although they are not completely planned, their economies are controlled within broad limits. The same is true for china. The chinese control the largest banks, biggest industries, the stock market, electricity production, energy. the smaller industries are allowed to operate in a free market. Even Canada controlled their banks during the 2008 recession making it easier for them to recover.

For hundreds of thousands of years humanity used a cooperative economy. it is only in the last 5000 years or so that the market exploitation of slavery, feudalism, and capitalism has come about.

The interstate highway system is completely owned and managed by the federal and state governments. Do they really want to go to market control with toll booths every ten miles?

Airports all over the country are owned by governments. Do they want hundreds of different companies running airports?

Good luck with your class mates. In my experience it is impossible to convert any of the free market zealots. But at least you can fight them. Don't let the bastards get you down, instead beat them down with Marx.

[citizen of industry]

The professor might be referring to the schematics for simple and enlarged reproduction at the end of Volume II, the ones Luxemburg based her Accumulation of Capital on. I've read in places that Soviet economists used these schemas in their economic planning. Basically, the schemas are valuable because they show Capitalism can't exist in a closed system because there is a surplus (during enlarged reproduction), which is plainly obvious from the beginning. But in a planned economy the surplus isn't a problem because it doesn't need to be sold. Apparently, the Soviets used the schemas for enlarged reproduction and deduced other formulas from them. But we know the work was incomplete and Marx was dead before they were published, and that Engels didn't want to change them much.

[RedMaterialist]

habash, let us know how your class went.

[Lowtech]

Usually the typical response I get is "what do you suggest we do instead? Follow the soviet union model of central planning? Look what happened to them." or my favorite "give me a case where an alternative method of organizing the economy succeeded and was sustainable. You can't! Therefore, markets, although they have their shortcomings, are the best way".

I literally get these two ALL THE TIME.

Interestingly, the "soviet model" mirrors modern corporations... Within corporations, internal resource mangenent is used, employees aren't allowed to use more resources than needed to do thier job, totalitarian management structure. In this sense, we do follow the soviet model.

and Lenin's opinion that the populace lacks the direction and structure only a "great man" like himself could provide mirrors the self serving attitude of capitalists believing they provide organizational skills most "idiot" humans are incapable of doing.

Also, humans existed for millions of years before the advent of a monetary system and markets. Indigenous peoples that are still around today are not dependent on market economies and therefore do not experience poverty, eventhough they have no "money" and do not utilize market systems to "manage" resources.

[Q]

I just want to point to Hillel Ticktin's point of view how the USSR was essentially a "non-society" held together by an almighty bureaucracy. Here is a video where he explains it more thoroughly (http://www.revleft.com/vb/russiai-theories-soviet-t168685/index.html).

[Lowtech]

He never came back...

I conclude he owned the professor with all the research and information we helped him with and in a fit of rage, the professor made a martyr out of him

We will remember thee, fellow leftist

Moment of silence for our fallen comrade.

[Sea]

Oh golly me I love this.. He's calling the USSR state capitalist and doesn't even know it!

[RedMaterialist]

He never came back...

I conclude he owned the professor with all the research and information we helped him with and in a fit of rage, the professor made a martyr out of him

We will remember thee, fellow leftist

Moment of silence for our fallen comrade.

Nah, he's only disappeared into the jungle to engage in guerrilla tactics.