One book that would almost change the fate of the world. If the guidelines contained therein were implemented in the Soviet bloc, a global systemic anti-capitalism would have arisen. The bloc would have become an invincible superpower — a bulwark, indestructible either by peaceful or military means, or similar. As a result of the law of convergence (sociology, historiosophy) the world would be socialist by now, and at the same time based on the free market in its feasible and useful dimensions. On the Economic Theory of Socialism, vignette of the second edition (1938), with an article by the then already late dean of the University of Chicago economics faculty, Frederick Manville Taylor (Fred M. Taylor) instead of a foreword.
Fred Manville Taylor was the author of the first concept of market socialism which, however, he only sketched, leaving its completion to his successors. The much more perfect Lange model (also known as the Lange-Lerner theorem) is developing to this day in the relay race of generations of neo-Marxians and the world's national left, from Abba Lerner to Mikhail Khazin (The New Red Project).
Source of the image: www.upress.umn.edu
OskarLange laughed as he knew how the free market supporters argued about an alleged double impossibility of the socialist planned economy. Professor Lange don't needed much time to realise that Mises and Hayek are suggesting that the proper prices of thousands of goods have to be determined — if the capitalist free market would be abolished — by solving millions of equations. In the light of the economic rules discovered by Walras and Pareto they were only a limited number of indicators, provided by any complete statistical data, really needed to be able to emulate capitalist prices in the first stages of the socialism and later to determine them in the process of economic planning.
The Austrians throw themselves ridiculous
... and the successful economic planning of the prices and amounts of a plenty of agricultural products, purchased by the State with the price guarantee for the croppers by the New Deal administration delivered an evidence of their ignorance. Besides, Lange don't cared what earlier socialist writers — including for Marx and Engels — suggested as a solution to the problem of goods and services values and how to pay the employees for the labour.
He simply knew that there are the same economic laws, discovered during the late 19th century which applies to the capitalist, New Deal and socialist as well as the fascist economy
The only way to suspend them for a while is to turn the whole country (or a number of conquered countries) into one big high security prison with death penalty for the poor labor efficiency etc. etc. Instead of advocating genocide the good guy Professor Lange outlined another solutions.
The foundations of the socialist system in the national economy according to Oskar Lange — that’s how the society and the State should work
In the socialist society model according to Oskar Lange, the property of all means of production (except labour), financial institutions and main transport means is public. Therefore there is no market for capital goods, including manufactured goods, and a fixed accounting price for these goods replaces a variable market price. In this economic model there is the Central Planning Unit (CPU) and the citizens in the roles of buyers, employed persons and producers/owners.
The fixed theoretical price of companies' assets is determined by the CPU outside the market (consumer goods and labour market) and maps the conditions under which alternatives (opportunity costs: leisure time, safety, health, etc.) and financial conditions for employees in public enterprises are offered.
The strict centralized surveillance of the economy lasts only for a short time, because another socialist development, foreseen by Oskar Lange, will follow soon
Individuals consequently participate not only as consumers and employees in the economic system, but also as owners and producers. They receive their income under the conditions of labor costs and, on the other hand, in the form of a social dividend. Most daily based economic activities would be decentralised and carried on by a large number of separate organs of socialised economy which would have their own nominal capital and their own profit and loss account, and could be managed on a similar manner like separate and independent enterprises under pure capitalism.
Optimization of prices under market socialism: the market emulation, the fixed (theoretical) prices as well
We should, however, stop for a moment getting to know abstract concepts of economic theories … What we need most is a empathetic consciousness that will recognize not just the cold facts and definitions but the strong feelings about it. To satisfy the needs of the people, to avoid unemployment and unsuficcient goods supply is not a matter of just facts and figures.
Both the authors of the essay and those who read these words have likely come across the Linux operating system during their lifetime
An operating system which can be seen as an interesting alternative to Windows. Thanks to Linux I had my peace and quiet! Oh yeah! Unfortunately, Linux software poverty is a serious matter for the PCs or laptops. Linux offers only basic areas of application for an average user who is usually not a specialist in the computer technology. There are many applications missing that are sometimes extremely useful or specialized (for example the language tools with dictionaries created by the user) that one has become accustomed to have within reach under Windows.
For this reason some good people have made it possible to run Windows applications on Linux by creating the Wine Project for this purpose. So, you can run Windows software with Wine on several popular Linux distributions — without a copy of Microsoft Windows. This free and open-source compatibility layer is of much value, although one have to bee an experienced user to run all Windows applications needed under it smoothly. Another thing — you must keep in mind that Wine Is Not an Emulator (WINE).
Following the same principle as Wine does not replace Linux with Windows, Oskar Lange has created a system model, in which socialism works and does not disappear at all as a result of the use of all realistically feasible and useful elements of the free market
The role of the competitive conditions (consumer goods and labor market) is now to provide a largely unswerving method of allocating resources and means of production to different branches of the economy and production processes through trial and error. Over several production and demand periods, the equilibrium price can finally be found or, if the state's field of maneuver with regard to a certain product group is limited, it can be determined by balancing demand and supply quantities.
An optimization in which the demanded amount of each economic good corresponds to the supply amount ─ the equilibrium price. This means ─ at the same time ─ the search for the right price as a result of the free market game, on the one hand, but also on the path of indispensable intervention in the economy by the state, whose organs determine the extent of demand and at the same time the production quantities and the available goods and goods stocks, which must be taken into account.
In Lange's model, the central government and its agencies have to work hard to adjust the national economy to the needs of society and the State
The CPU simulates or, to say it more exactly, emulates the market of consumer goods by a trial and error process first elaborated by Leon Walras and mathematically explained by Vilfredo Pareto, which should secure the so called Pareto efficiency. We should remember: as the Parethian general equilibrium theory was introduced in practice, first in the fascist Italy and later in United States of America, both countries get rid of economic crisis and quickly became great economic powers.
The buyer's preferences regarding the payment price can and should be proven in the price decisions of the responsible planning departments. The authoritarian (logocratic) administrators in the CPU will follow the preferences of the consumers and find the right price for the consumer goods, capital goods and other means of production.
The Central Planning Unit should be required to raise prices for consumer goods for which there is particularly high demand and to lower prices for which demand is lower than supply. Autonomous producers will increase or decrease production and the CPU will start new investments to remove supply shortages
The planning institute, which will play the role of a patriotic economic tsar or dictator, will therefore be the key element of the logocratic system of market socialism. By combining expertise in econometrics (mathematically based economics), statistics and sociology, the staff of this institute should earn and receive a good remuneration and at the same time represent the highest moral qualities. It would be advisable to create in their ranks something like an ethos of a knights´ order and at the same time to grant them the status of civil servant with the rank of extraordinary and authorised minister for the director of the Institute, deputy ministers or secretaries of minmisterial departments for his deputies and heads of the research units.
The central economic planning yes, an entirely centralized economy no
The socialist managers of production, i. e. the executive officers of the manufacturing industry and state-owned big farms would be free to decide how much and how to produce on the basis of the prices fixed by the central planning unit.
According to Professor Lange the directors of the industries (taking into consideration the reports and requests of the managers of individual plants) would have also the further task of making the business plan of new investments which should provide the amount of equipment in the industries so adjusted that all important goals of national economy could be achieved. The repayment of investment costs under the socialist market economy will consist of securing that “the marginal cost incurred by the industry ” in producing an output which “can be sold or accounted for at a price which equals marginal cost ” is the lowest possible. In other words, to expand production of the individual plants till marginal costs are equal to price.
(On the Economic Theory of Socialism, page 77)
The Lange model was created to establish the systemic conditions for a rational and extremely efficient use of the available resources within the framework of the socialist economy
In this way, the correct distribution of consumer goods as well as the allocation of various activities and the guiding principles of efficient production of assets must be determined quickly and efficiently. This should also allow to meet all the essential needs of the common people.
Satisfactorily and practically according to Lange's assessment, the production process under competitive socialism is more rational and efficient than in large private companies or in the planned economy led by bureaucratic ministries. It also leads to much more general satisfaction in society and happiness in the life of an average citizen
The pivotal economic theory he wanted to apply to Poland and smaller nations around the world was ready and (also through his own involvement in the creation of the New Deal) largerly tested in practice. The moment he dreamed of when physicians fought for his life in a Swiss sanatorium as he was a school-aged boy reading the archive yearbooks of the Austrian socialist press, had come. The grown-up Oskar Lange was still anticipating great victories and bitter defeats.
At the present moment, it is extremely important for our country and the whole world to get rid of the neoliberal ideology that says: to hell with the poor! All who read these words can participate in the peaceful struggle of the brilliant thinker for good and progress, because the struggle never ends. Honour his memory!
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