Efficient Economic Planning

[RP150]

One issue of socialism was brought up by Ludwig von Mises who stated that without competition the state would not be able to efficiently determine prices and allocate resources, this of course started the socialist calculation debate, my question is how in your opinion would the state be able to efficiently plan the economy and production.

[Tim Cornelis]

It wouldn't. Communism is a society based on the free association of equal producers that administer commonly owned resources, in other words, a stateless, classless, moneyless society. A state planning commodity production isn't communism, which is what I'm shooting for.

[Anglo-Saxon Philistine]

Socialism, as the term is used here, has nothing to do with the state setting prices. In socialism, there is no state, and there are no prices as neither the market nor money exist. As such, capitalist efficiency - namely extracting profit from the workers in an efficient manner - is of no concern to us. Socialist planning is planning for human need. To say that society can't plan production for human need is to say that either:

(1) the aggregate need can't be assessed; or
(2) that the resource allocation needed to satisfy human need can't be calculated.

(2) is an outright denial of reality. To calculate the necessary resources, all it takes is to know technical coefficients - how much iron is spent producing one unit of steel, and so on. (1) is even worse, it represents the desperate appeal to complete agnosticism. If human need can't be assessed, then no set of relations of production can be compared based on how much it satisfies human need. But we do that all the time - we know capitalism is terrible in satisfying human need, for example.

[Tim Cornelis]

Could you expand on the technical coefficients? How does that work? Presumably that would calculate the optimal use of resources to produce goods, and consumer feedback via consumption (demand) would say which goods should be produced or something?

[Anglo-Saxon Philistine]

Technical coefficients (I believe that is the most widespread term; the same quantity has also been referred to as "norm" or "limit" rather than "coefficient") quantify the way in which resources are spent in optimal production conditions (e.g. how many tonnes of pig iron we need to expend to produce one tonne of steel, how many cubic metres of furnace space we need to produce one tonne of steel, and so on, if we're working in the optimum regime, that is, if we're neither under-utilising the equipment we have nor overworking it so that it will break down sooner).

Once that is known, it's a simple matter to calculate the resources we need to allocate, given a predicted (this is an important point, as the planned allocation of resources proceeds ex ante rather than the ex post market allocation of resources) demand. How demand can be predicted is not entirely straightforward. Much of it will probably be based on extrapolations from consumption trends, but we will probably want to use more involved models, that also take into account effects like population growth or decline, the changing age structure, changes in population density etc. That is all hypothetical at this point, of course.

[RedMaterialist]

One issue of socialism was brought up by Ludwig von Mises who stated that without competition the state would not be able to efficiently determine prices and allocate resources, this of course started the socialist calculation debate, my question is how in your opinion would the state be able to efficiently plan the economy and production.

By "state" I assume you mean the dictatorship of the proletariat or whatever state exists during the transition to communism. That state would determine prices and allocate resources the same way that gigantic, monopolistic corporations do today: with massive computer systems. When GM decides to introduce a new automobile it first does years of consumer testing, engineering, design, marketing, analysis of the market for both its supplies and the product. GM knows exactly how many screws it will need for each automobile. It then creates the demand for the product with advertising.

The price of the new automobile is not left to the uncertainty of the market; the price is fixed well in advance of the release with a built in profit margin.

Competition no longer exists for the mass corporation. The entire economic structure of the corporation is minutely planned down to the last detail.

All the state has to do is adopt the economic planning of the corporation, without adopting the fascist nature of the corporation.

There is already a partial, limited use of planning by the state for setting the price of money. The Federal Reserve gathers statistics on the entire economy, then crunches the numbers and decides what interest rate banks should pay for government loans. This is an oversimplification, but it is the essence of government planning for the price and allocation of the economy's fundamental resource, money. Of course, the Mises lunatics want to do away with the fed and go back to the gold standard.

Note: The central planning mechanism of the modern corporation was explained by John Kenneth Galbraith in the New Industrial State. He may have been a bourgeois economist, but I think socialists can learn a lot from him. Besides, the Mises crowd think he and Keynes were communists.

[ckaihatsu]

How demand can be predicted is not entirely straightforward. Much of it will probably be based on extrapolations from consumption trends, but we will probably want to use more involved models, that also take into account effects like population growth or decline, the changing age structure, changes in population density etc. That is all hypothetical at this point, of course.


My understanding is that a simple-process 'rolling inventory' / stock-control method would suffice, due to recursiveness going-forward -- if someone takes a pair of shoes or a pound of bananas, the system will update its record of the inventory to reflect that change, sending along that data to respective producers / supply chains. And, given today's digital data-crunching prowess, all of this could be happening in realtime, undoubtedly. (This would mean that linear calculations, extrapolations, and 'predictions' would mostly be obviated because the system would be so responsive to the changes of normal conditions.)

These *logistics* have become like nothing -- but what's more intricate, in terms of theory, is how to properly address inputs of *labor*, in relation to a collectivist productivity and its material output for all.

[Anglo-Saxon Philistine]

This is a popular proposal on RL, but it still involves resources being allocated ex post. Furthermore, the effects propagate through the entire economy (to the extent that it makes sense to talk about an economy in socialism) in an uncontrolled manner. Obviously producing one loaf of bread doesn't just mean pressing a button on the bread-loaf-summoning machine; it involves producing additional grain, replacement mill parts (with enough loaves of bread), chemical fertiliser, water etc. etc. For production to function smoothly, without delays and scarcity, this movement of producer goods needs to be planned, and for that to happen demand needs to be assessed ex ante. (This is also why the Stalinist "complete the five-year plan in four years" campaign was destructive; an economy requires balance between its various parts and when one sector of the economy grows ahead of all the others, it creates problems.)

[ckaihatsu]

This is a popular proposal on RL, but it still involves resources being allocated ex post. Furthermore, the effects propagate through the entire economy (to the extent that it makes sense to talk about an economy in socialism) in an uncontrolled manner. Obviously producing one loaf of bread doesn't just mean pressing a button on the bread-loaf-summoning machine; it involves producing additional grain, replacement mill parts (with enough loaves of bread), chemical fertiliser, water etc. etc. For production to function smoothly, without delays and scarcity, this movement of producer goods needs to be planned, and for that to happen demand needs to be assessed ex ante. (This is also why the Stalinist "complete the five-year plan in four years" campaign was destructive; an economy requires balance between its various parts and when one sector of the economy grows ahead of all the others, it creates problems.)


Understood, but I'll have to reiterate, in other terms -- you're showing a *classical* understanding and/or an *abstraction* of a workflow pipeline, that, in operation, would simply be operating.

Think of it, if you would, more in terms of a pump that's pulling liquid upwards -- initially for awhile energy will have to be spent just to get the existing pocket of air expelled while pulling the waterline up, but once the water itself is being pumped up and out, it's *working*. It's operational and will be flowing indefinitely as long as there's water to be pumped.

So obviously the analogy is to the world's productive activities and capacities, post-capitalism. Really, existing communications technology could just handle all of the workflow complexities you've described. You seem to be almost *mystifying* the subject matter by using the term 'uncontrolled manner' -- is it *really* 'uncontrolled', because that would then imply that supply-chain ripple effects could always potentially be 'uncontrollable', which would suck for us.

Worse, it's a two-fer -- how exactly would resources still have to be allocated *ex post*, if no markets are being used? Either planning is done upfront, or it isn't.

A 'rolling inventory' / stock-control system would be cascading, just as you've laid out, with zero cause for anxiety, because newer, complexity-type approaches to this functioning could conceive of a 'boot-up' period (the water being pulled up, displacing the air) where significant productivity would *not even be expected*. (Basically a practically neverending cascading-pipelines-of-production socialism would just be 'off-line', as it is now, unfortunately, until everything got linked up the way -- or ways -- it needs to be in order to be humming along.)

This is a logistical way of saying that the workers themselves know, and would know, the best ways to interact with co-producers, and so, over time, certain *patterns* of linked productive behaviors would be ongoing, to effect total production. Our collective interest is in *optimizing* this entire arrangement of productive capacities, necessarily on a worldwide geographical scale. And, once done, all that would be required would be the consistent supply of all requisite inputs, for desired output. Regular-type changes over time, trends, shifts, etc., wouldn't cause the slightest hiccup because the system operates *recursively*, constantly communicating cascading information about the system upstream (and publicly) -- with an unfailingly dependable, always-virtually-realtime live set of info at hand there'd be no problems with anything unexpected.

It wouldn't even be an exaggeration to say that the system could even recover fairly quickly from catastrophic events -- natural disasters -- without the conventionally-expected human intervention of programming work to 'bug fix' the entire program. The obvious analogy -- and precedent -- is the network of the Internet itself. Certainly it could be set up for certain nodes to affect other nodes, perhaps in a cascading arrangement, mirroring empirical reality and developments as humanly necessary / required.