ECA Working Group

7 posts / 0 new
Last post
JimN's picture
JimN
Offline
Joined: 5-06-09
Mar 23 2010 10:25
ECA Working Group

A group from the non-market, non-state socialist/communist/anarchist sector to
explore responses to the Economic Calculation Argument posed by the Austrian
school of economics.

In his introduction to "Non-Market Socialism in the Nineteenth and Twentieth
Centuries" John Crump said:

"... if we use words accurately, it is unnecessary to qualify 'socialism' with
'non-market' because socialism is, by definition, a marketless society. The
market cannot coexist with socialism because socialism means that society owns
and controls both the means of production and the goods which result from
productive activity. For the market to exist, some sectional interest (an
individual, a joint-stock company, a nationalised concern, a workers'
cooperative and so on) has to be in control of part of the social product, which
it then disposes of by entering into exchange relations with others. Exchange
cannot take place when society, and none other, controls the means of production
and the social product. Far from socialism being compatible with exchange and
the market, the generalised production of goods for exchange on the market is
the hallmark of an entirely different type of society - capitalism."

But, in the absence of the market, how will a non-market socialist society make
decisions about how to allocate scarce resources?

Ludwig von Mises and his followers, who came to be known as the Austrian school
of economics, argued that it would be impossible for a non-market socialist
society without recourse to a price-mechanism to make rational resource
allocation decisions. This, they argued, would result in gross inefficiency with
disastrous consequences for society.

How would a non-market socialist society avoid being faced with an insolubly
complex puzzle when attempting to make resource allocation decisions?

What contribution can we in our sector today make towards a potential method of
economic calculation in a society of free association tomorrow?

All those interested in contributing to the work of the group are invited to
join us at:

http://tech.groups.yahoo.com/group/ecaworkinggroup/

arminius's picture
arminius
Offline
Joined: 11-08-06
Mar 23 2010 12:46

Very good idea, Jim. You may want to mine the libcom and ABC archives for relevant materials in various threads. Also the article by Robin Cox in WiC's late journal Common Voice was quite good, and often gets quoted, if not correctly attributed.

Have you tried posting this on the ABC list, btw? Also, do you mind if I post this announcement in the Spaces of Hope blog?

JimN's picture
JimN
Offline
Joined: 5-06-09
Mar 24 2010 19:29

Thanks arminius.

By all means post it anywhere you think will be of benefit.

Excuse my ignorance. Which ABC list?

arminius's picture
arminius
Offline
Joined: 11-08-06
Mar 28 2010 13:24

This one: http://www.anarchistblackcat.org/

JimN's picture
JimN
Offline
Joined: 5-06-09
Mar 31 2010 15:13
arminius wrote:
This one: http://www.anarchistblackcat.org/

Thank you arminius.

RedHughs
Offline
Joined: 25-11-06
Mar 31 2010 22:01

The question of how to organize a post-capitalist society is interesting but I don't have any interest in working with people without having a larger perspective in common since I don't think anything terribly interesting to me would come out of such an approach.

Moreover, I think can outline one plausible-enough scenario to simply be done with the whole "economic calculation" argument reasonably quickly. This model isn't the blue print for communism but rather a summary of one system good enough to refute the position that a price-system is a necessary foundation for the optimal distribution of resources in a production process.

1). The model would involve "appropriate scale" technology. Centralized, large-scale production would continue but would mainly be around general-purpose semi-finished products which each small collective/commune could customize to their hearts content. The aim is to minimize burdensome toil. Constructive, creative activity would be continued. A random, hypothetical and not-set-in-stone example: Bicycle parts and high-quality steel tubes might be mass-produced but each individual would able to weld-together their frame and build-up their own bikes. The main thing is that production could divided into small-scale, pleasant processes whose processes and results wouldn't need to be calculated and processes large scale enough to permit a systematic, mathematical calculation of their results. Just much, the "pile of raw material plus workshops" approach would be a way around the general "everyone would want something different" argument. In detail, everyone would get something different by making or having friends make it, etc.

2) The large production processes can have their inputs and outputs balanced by using optimal control theory. Each large-scale work group would spend some time determining the production function of the group's production process and that function's partial derivatives. This would allow the direct calculation of each production process's Lagrange multipliers and thus allow a planning process to determine the optimal distribution of inputs for desired distribution of outputs (or the allocation of resources that was close to optimal as it is mathematically and computationally practical to find). This planning process wouldn't have to be done by a centralized group but could easily be run on PC of each group linked together.
-- It should be noted that this kind of calculation in optimal control theory is sometimes described as simulating the market (with the Lagrangian multipliers refered to as "shadow prices") but in fact such an algorithm is theoretically optimal in all cases whereas a market system is only optimal when actual prices correspond to the lagrangian multipliers/"shadow prices" of an optimal control system. And that is not really a very general case. It only happens the production function corresponds to the Cobb-Douglas function, a relatively special case despite the fact that Cobb-Douglas is touted by econ textbooks (as the Wikipedia link notes, the Cobb-Douglas model doesn't even have consistency between a micro-view and macro-view, quite a weakness for a function that's the foundation of the theory of markets as efficient allocators. The derivation of the Langrange multiplier in the latter Wikipedia Section can be reversed to show my assertion that Cobb-Douglas is essentially the only production function in which cost-prices and Lagrange multipliers are equal and thus any other production function would imply that a price-system is an inherently sub-optimal distribution system).

3) This approach to large-scale planning is pretty much the way the Soviet Union as well as the way some US statist-military-industrial production ran. It's basically the way to run large scale production efficiently - there's no special magic to the market in this sense. Optimal control theory is methodology whose major problems have in general been solved - we can just use these methods.
The "problem" with the approach of the coordinated matching of inputs and outputs not that it isn't theoretically optimal. It is rather that, as Von Mises notes, calculating an actual production function requires on-ground-knowledge and requires one to constantly tweak the system. In the Soviet Union, the material interests of the factory managers was opposed to the interests of the central planners in the sense that the central planners wanted production as a whole to be optimized whereas each factory manager wanted to personally look good and advance in the hierarchy by meeting their particular quotas. These opposed interests lead the factory managers to hold back their data and mis-report in order accumulate a slack which could be used for their purposes - essentially, it was the creeping return of individual capitalism into the state capitialist machinery due to the class-domination of the bureaucracy.

In a system where work groups don't have an individual incentive to hold back information but rather have an incentive to share information, the optimal control could work perfectly well.

To recap: The whole rhetoric of the market as a uniquely efficient information-system is balderdash. What a private market has over centralized planning is only the rough correspondence between the price-measure of production and the class-interests of the decision makers. In a class system, every person with power has an incentive to hide information about the conditions they manage/control from both every other person in power as well as from the dispossessed. A price system is a way for class society to get it's ruling class to cooperate with itself - that is important for capitalism. For society of antagonistic interests, a price system is "a great innovation". For communist society, it offers nothing but the threat of a return to class society.

That's a wrap with full maths.

Any questions?

JimN's picture
JimN
Offline
Joined: 5-06-09
Apr 1 2010 18:08
RedHughs wrote:
Any questions?

Yes. Why don't you join our group? This is exactly the kind of thing we're discussing.

JimN