[Marxism] Hayek and Trotsky

Jim Farmelant farmelantj at juno.com
Fri Sep 19 18:40:22 MDT 2014

Below is a selection of comments that wee posted to my Facebook wall on Hayek and Trotsky

Jim Farmelant
Learn or Review Basic Math

Wojtek Sokolowski:
   I am pretty much with Lange on this. As far as business decision making is concerned, it can be done based on prices in both "capitalist" and "socialist" societies, because it is the same kind of people - business managers - who make those decisions in each system. The main difference between "socialism" and 'capitalism" is the accumulation of surplus. In socialism it is broadly distributed, in capitalism it is concentrated in a few hands. According to Lange, the latter is less efficient in achieving optimum distribution - the main purported goal of the market system - because it prioritizes the preferences of a few wealthy individuals over those of many less wealthy consumers. 

Lange was pretty much opposed to "command economy" as were most EEuropean economists. AFAIK, "command economy" never existed - it was invented by Western propagandists to discredit socialism. What did exist was policies of import substitution and prioritizing investments over consumption (aka austerity measures) to accelerate industrial development combined with price controls to avoid negative impact of industrialization on the prices of food (i.e. an anti-poverty measure). 

This brings me to the main point that socialism was far more successful economically than capitalism, because it managed to achieve two contradicting economic objectives at the same time: (i) rapid economic development and industrialization and (ii) prevent pauperization of large segments of society that such development brings (at least initially). Capitalism could only achieve the first objective, but miserably fails on the second.

Néstor Gorojovsky:
     You should have added Lenin, and so should have done Hayek.

Jim Farmelant:
    I agree with all that Wotjek. The question in my mind is that Trotsky in his 1932 article. "The Soviet Economy in Danger" presented an argument that was strikingly similar to Hayek's ideas concerning economic calculation under socialism. Was Trotsky familiar with Hayek in 1932? Possibly, although I kind of think that Hayek was probably too obscure a figure back then. Trotsky might have known about Ludwig von Mises, since Bukharin had cited him in articles that he wrote in the 1920s in defense of the NEP. I'm wondering if the direction of causality might have been in the opposite direction. That is Hayek might have been influenced here by Trotsky. Stranger things have been known to happen

Wojtek Sokolowski:

    Jim Farmelant Possible, but really a non-issue for me. I do not believe in ownership of ideas. ideas circulate in society in response to events and historical developments, and many people entertain and embellish them. Attributing them to one person makes no sense at all. It is an ideological statement of the primacy of private property over socialized property. It is my understanding that there was a lot of cross-border influencing going during industrialization - Gerschenkron has a nice piece on that titled "economic backwardness in a historical perspective.' There is also more recent research on organizational isomorphism showing high levels of mimicry in organizational behavior. It thus does not surprise me that many people could arrive at similar conclusions or solutions of emerging problems - but only few managed to patent their "ownership" of these conclusions or solutions. 

Creativity is grossly overrated because it legitimates private property relations. As Corey Robin recently argued, the purported scarcity of creativity and innovation is the basis of the defenses of the capitalist social order by hayek & Co. In reality, creativity is far more common than Mr. Hayek &Co I would say 3 in every five people are innovative and creative as opposed to 1 in a 100 as the neoliberal gang wants us to believe. What makes difference is official recognition of that creativity in the forms of patents and other types of intellectual property rights - only a few get that recognition, which creates an illusion that it is rare. In fact it as common as water - it is much harder to find people who are NOT innovative and creative in one way or another than those who are.

Marv Gandall:
    Jim quoted Trotsky: "If a universal mind existed, of the kind that projected itself into the scientific fancy of Laplace – a mind that could register simultaneously all the processes of nature and society, that could measure the dynamics of their motion, that could forecast the results of their inter-reactions – such a mind, of course, could a priori draw up a faultless and exhaustive economic plan, beginning with the number of acres of wheat down to the last button for a vest. The bureaucracy often imagines that just such a mind is at its disposal

Would he say the same today? Hasn’t data-gathering technology made price discovery and therefore central planning more feasible?

Jim Farmelant:
     Yes and no. Computer technology would make the job of coordinating data a lot easier for central planners but people like Hayek would still object that since information would still be dispersed among multitudes of different people and organizations there would still be the problem of getting them to share that information. Hayek thought that you still would need markets to do that. Oskar Lange, while asserting that computers would make rational central planning much more feasible conceded that markets would still be required to provide a check on the data being gathered for the planners.


Wojtek Sokolowski:
     There is an argument in institutional economics between decentralization (ie. market) and organizational hierarchy (by which they mean large corporations). Transaction cost favor hierarchy over markets, but risk avoidance favors market over hierarchy. From a computational point of view, economy level planning is mathematically impossible due to the complexity of the task, which results in the existence of more than one unique solution - see Paul Ormerod, "The Death of Economics". The argument is basically that it is impossible to estimate the Pareto optimum in complex systems because the system of equations representing that system has more than one solution, in fact infinite solutions, so any solution picked by the computer is not the definitive optimum.

Marv Gandall:
    And what would Lange say today about the exponential advance in computer technology in the near half century since his 1967 essay was published? As you know, Paul Cockshutt and Allin Cottrell have argued forcefully for some time that central planning is now technically feasible because of the rapid development of this technology, much of it having occurred since the collapse of the USSR. Are there any solid critiques of their thesis from a perspective.

Marv Gandall:
    Last sentence should read: Are there any solid critiques of their thesis from a mainstream, heterodox, or Marxist perspective?

Tom Canel:
     Really fascinating post, thanks Jim! It seems to me that in a complex economy with relative scarcity market mechanisms may be indispensable. That doesn't mean that the private accumulation of capital is necessary. Indeed the argument that many surprisingly mainstream economists are making that growing inequality is bad for the economy suggests that the private accumulation of capital is currently having a negative impact. so the question would be then, can you have market mechanisms without the private accumulation of capital. Marx seems to have thought no, but I would question whether he was right.

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