Calculation Problem Again

Justin Schwartz jschwart at
Sun Oct 30 21:35:31 MST 1994

On Sun, 30 Oct 1994 tgs at wrote:

> Questions:
> What about their being embedded in a market makes inapplicable the planning
> that goes on WITHIN huge corporations  who have huge monopolies over that
> market?

Well, for one thing, the fact that they don't have monopolies. Having
Toyota around keeps GM honest.

  It is McNally's/Mandel's contention, I believe, that very little
> of the vaunted market rationality enters into these internal relations.

This is an empirical question, no? One wants to see if they use market
prices in their internal cost accounting. Anyway it's not clear how much
that matters as long as market rationality governs the overall shape of
their investment and production decisions.

> These corporatations make their estimations on how much previous demand
> has emptied the shelves.  So previous demand is the ticket in our corporate
> economy as well (This was the contention of my professor Robert Engler,
> who has written two books on the oil corporations: we already have planning
> in the late, corporate capitalist economy;

Yes, yes. And markets are ex post facto systems. The point is that they
have ex ante checks. You make a mistake, you have a surplus, so you have
to lower your prices; you have a shortage, your competitor gets the
business. Profit gives you an incentive not to make mistakes. This
incentive is largely lacking in planned systems--including within big
corporations. That's how GM got into such a mess.

 the question is no longer whether
> to plan, but instead, WHO plans).

Never an issue. I'm not arguing against intra-firm planning but against
trying to run the whole of society like GM. Tom, let me quote Trotsky, who
in his critique of Soviet planning in 1932--a critique framed in the
IDENTICAL terms to the Mises-Hayek one I have been pushing here, said that
to make the system work the plan would have to be realized through the
market. Of course he imagined that this would be transitional to a purely
planned system, but never faced the obvious question of how to get around
the question he posed for the Stalinist planners.

> We have computers now that can coordinate the fit between group political
> consciousness and individual desires.

??? Look, Tom. Check out your Arrow Theorem. This particular
"coordination" is no mere technical fix, even if we had big and fast
enough computers to recompute an input-output matrix of--say--200 million
by 200 million evevey few days (this is essentially what markets do).
There are profound conceptual problems in solving exactly the fit you are

> Why can't we program in plans for a glut on every item, so that scarcity is
> not a problem?

Can spell W-A-S-T-E? Can you spell L-I-M-I-T-E-D R-E-S-O-U-R-C-E-S?

  Are you not assuming that the artificial scarcities produced
> by capitalism will still be with us under socialism?

Indeed, and some of the artificial scarcities produced by socialism too.

> What is it about the market, exactly, that makes it superior in dealing with
> these problems?

(1) No one has to know everything or even very much; (2) There is an
incentive for each to get accurate information he for his own purposes;
(3) There is an external check on waste and error. For starters.

 If you want built-in, structural insensitivity to human needs,
> you have no further to look than the market system, which manages to
> factor out such luxuries as basic human survival for everybody,

That's why we need basic income, a welfare state, redistribution, etc.

 not to mentino
> the basic need not to be exploited--which is an essential feature of the
> market as discussed by McNally, a point you have not yet addressed.

In labor-managed market socialism no one is a wage laborer. After taxes
the workers in each firm appropriate the whole surplus and do with it what
they will. So where's the exploitation? McNalley says that market
discipline--the things a market does to keep firms honest--constitutes
exploitation. This reveals a fundamental failure to grasp the notion of
exploitation. Exploitation is forced unpaid surplus labor, or more
precisely forced appropriation of surplus. This is not possible within
a LMMS system.

> My feeling, now as before, is that these objections are challenges worth
> tackling,

So for God's sake tackle them! I agree they're worth tackling. The problem
is that no one has done so in a remotely adequate way. All I hear from the
orthodox is how awful markets are. Fine. Show me something better.
McNalley is no good on this, fine as he is as an economic historian.
Mandel at least recognizes the problem, but his solution is hopeless.
Albert and Hahnel are the best, but if someone cares to post a defense of
their ideas I will explain why their proposal doesn't work either.

Don't pro-planners realize that at this point they are talking to
themselves and to the handful of exasperated market socialists like
myself who will still listen? The audience has walked out, guys. What will
you do to get them back?

 not reasons for going back to the disease.  Under Bolshevism, which
> aimed to get all trade under its immediate control, which spawned a huge
> bureaucracy because input from below was discouraged, the cure was worse than
> malaria.  But there is another way.


More information about the Marxism mailing list