From: Jeff Davis (jrd1415@yahoo.com)
Date: Sun Nov 03 2002 - 17:11:55 MST
Greetings extropes,
I've just returned to Canada, my own computer, and
"the list", after a little sojourn to my old turf in
Half Moon Bay. While I was there, I was able to keep
up with the list by going online at the Half Moon Bay
Coastside Chamber of Commerce and Visitor's bureau,
where until my recent move, I was the resident
savant/handyman.
Regarding this thread. A week or so into the
discussion, it dawned on me that the participants were
all over the map as to just what socialism was. In
the words of the Red Queen (not Humpty Dumpty)
everyone seemed to be in "Words mean what I want them
to mean" mode. My head began to spin, so I Googled up
"encyclopedia socialism" in search of something to
steady me and cut through the fog of ideological
combat.
You can do the google yourself, there's a bunch of
info from various perspectives and of varying length.
One that I liked was by Robert Heilbroner, at:
http://www.econlib.org/library/Enc/Socialism.html
Interestingly and helpfully, it specifically addresses
central issues of economic theory, citing von Mises
and Hayek's challenges, the responses of Oskar Lange,
and Heilbroner's further synthesis of the two.
Here's a small excerpt:
Understanding of the difficulties of central planning
was slow to emerge. In the midthirties, while the
Russian industrialization drive was at full tilt, few
voices were raised about its problems. Among those few
were Ludwig von Mises, an articulate and exceedingly
argumentative free-market economist, and Friedrich
Hayek, of much more contemplative temperament, later
to be awarded a Nobel Prize for his work in monetary
theory. Together, Mises and Hayek launched an attack
on the feasibility of socialism that seemed at the
time unconvincing in its argument as to the functional
problems of a planned economy. Mises in particular
contended that a socialist system was "impossible"
because there was no way for the planners to acquire
the information—"produce this, not that"—needed for a
coherent economy. This information, Hayek emphasized,
emerged spontaneously in a market system from the rise
and fall of prices. A planning system was bound to
fail precisely because it lacked such a signaling
mechanism.
The Mises-Hayek argument met its most formidable
counterargument in two brilliant articles by Oskar
Lange, a young economist who would become the first
Polish ambassador to the United States after World War
II. Lange set out to show that the planners would, in
fact, have precisely the same information as that
which guided a market economy. The information would
be revealed as inventories of goods rose and fell,
signaling either that supply was greater than demand
or demand greater than supply. Thus, as planners
watched inventory levels, they were also learning
which of their administered (i.e., state-dictated)
prices were too high and which too low. It only
remained, therefore, to adjust prices so that supply
and demand balanced, exactly as in the marketplace.
Lange's answer was so simple and clear that many
believed the Mises-Hayek argument had been demolished.
In fact, we now know that their argument was all too
prescient. Ironically, though, Mises and Hayek were
right for a reason that they did not foresee as
clearly as Lange himself. "The real danger of
socialism," Lange wrote, in italics, "is that of a
bureaucratization of economic life." But he took away
the force of the remark by adding, without italics,
"Unfortunately, we do not see how the same or even
greater danger can be averted under monopolistic
capitalism."
The effects of the "bureaucratization of economic
life" are dramatically related in The Turning Point, a
scathing attack on the realities of socialist economic
planning by two Soviet economists, Nikolai Smelev and
Vladimir Popov, that gives examples of the planning
process in actual operation. In 1982, to stimulate the
production of gloves from moleskins, the Soviet
government raised the price it was willing to pay for
moleskins from twenty to fifty kopecks per pelt.
Smelev and Popov noted:
State purchases increased, and now all the
distribution centers are filled with these pelts.
Industry is unable to use them all, and they often rot
in warehouses before they can be processed. The
Ministry of Light Industry has already requested
Goskomtsen [the State Committee on Prices] twice to
lower prices, but "the question has not been decided"
yet. This is not surprising. Its members are too busy
to decide. They have no time: besides setting prices
on these pelts, they have to keep track of another 24
million prices. And how can they possibly know how
much to lower the price today, so they won't have to
raise it tomorrow?
This story speaks volumes about the problem of a
centrally planned system. The crucial missing element
is not so much "information," as Mises and Hayek
argued, as it is the motivation to act on information.
After all, the inventories of moleskins did tell the
planners that their production was at first too low
and then too high. What was missing was the
willingness—better yet, the necessity—to respond to
the signals of changing inventories. A capitalist firm
responds to changing prices because failure to do so
will cause it to lose money. A socialist ministry
ignores changing inventories because bureaucrats learn
that doing something is more likely to get them in
trouble than doing nothing, unless doing nothing
results in absolute disaster.
------------------------------
My own view on discussions of socialism on this list?
About equal to Christian fundamentalists engaging in a
discussion of Satan's talents as a chief executive.
Americans are weaned on anti-communism the way
Christian zealots are weaned on Christian dogma.
Superstition armored with prejudice doesn't lend
itself to, much less participate in, open and fair
discussion.
Nevertheless, it had its moments.
I would much rather hear about how the present diverse
'ecology' of economic/social systems can make the
transition to the next stage.
PS Lee, Spike, sorry I missed you.
Best, Jeff Davis
"There is only one basic human right, the right to do
as you damn well please. And with it comes the only
basic human duty, the duty to take the consequences."
P.J. O'Rourke
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