[OPE-L:2204] Re: Re: Re: Re: socialism in a single moon?

From: Steve Keen (s.keen@uws.edu.au)
Date: Mon Jan 17 2000 - 21:14:18 EST

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Thanks for all the following Mike (and your paper on the subject, which
I've skimmed and enjoyed, and will comment on below).

I'm not a specialist in this area (though some years ago I did do an
analytic piece of Fel'dman's model, which showed that when the assumption
of an infinite labor supply was relaxed, the "heavy industry first" policy
would eventually lead to declining consumer goods output), so the info on
the institutionalisation of innovation was news to me.

It doesn't amaze me though that the mechanism to reward the implementation
of innovation was set too low, in the whole production target framework of
the Soviet system.

Your paper ["Kornai and the Vanguard Mode of Production", for others on the
list--coming out shortly Mike hopes, after the usual interminable delays,
in the CJE] does indicate that Kornai substantially weakened his "resource
constrained" critique by arguing that the vanguard party was a necessary
element of the Actually Existing Socialist economies. If so, then a
different resource constrained economy might not have the same problems.

I have argued in the past that Kornai's explanation wasn't the whole
story--even though the resource constrained analysis made sense, it was
also the case that Stalinism and specific policies, like the heavy
industrialisation focus, made the outcome worse. But I've seen them as
relatively independent forces, and now Kornai has effectively argued they
are causally linked: vanguard party leads to the other two.

I see a feedback mechanism certainly, and relations, but I wouldn't make it
didactic, and I think the resource constrained analysis still stands alone.
One reason for feeling this is that the resource constrained critique
actually applies to the neoclassical defence of capitalism--since the
neoclassical vision of capitalism is of a resource-constrained (not demand
constrained) economy.

So I think Kornai has weakened his arguments with his later work. But the
earlier arguments, I feel, still stand on their own. It wouldn't be the
first time that a scholar's later analysis has undermined his earlier work.

At 12:50 AM 1/17/00 -0800, you wrote:
>At 01:47 PM 1/17/2000 +1100, Steve wrote:
>>I believe that the level of innovation in the Soviet system could have been
>>a lot higher than it was, if for instance it had been institutionalised in
>>the same fashion that electrification or the expansion of heavy industry
> Your examples point to one of the problems because they were cases of
>extensive development and the issue here is one of intensive development.
>The innovation decision in fact was institutionalised in this way---
>centred in research institutes. The problem, though, was getting those
>potential innovations introduced in individual productive units (i.e., made
>real). What existing firm would want to accept the honour of introducing
>the innovation when bonuses/premia were primarily tied to making the annual
>output targets (which could be negatively affected by new methods)?
>According to Joseph Berliner in his book on the innovation decision, the
>problem was that the bonus/premium reward associated with accepting
>innovations generally was too low with the result that firms avoided these;
>in contrast, where the bonuses set were high, they competed to introduce
>specific innovations. The problem comes back to the existence of an
>administrative mechanism which treated achievement of annual production
>targets as the highest priority--- an administrative mechanism whose
>relation to socialism is rather elusive.
>>Kornai puts a very serious argument forward that the de facto mechanisms of
>>a socialist economy do not provide the incentives to commit economic
>>resources to innovation, whereas the de facto mechanisms of a capitalist
>>economy do.
> Kornai did contend in his early works (eg., Economics of Shortage) that
>such phenomena flowed simply from a shortage economy (and that the
>socialist economy inherently is a shortage economy). However, his argument
>(and this interpretation) is, IMO completely undermined by his own
>subsequent work, The Socialist System, which roots all tendencies of the
>system in the "genetic program" given by the Marxist-Leninist Party in
>power. He argues, in fact, that he had not changed his position but was now
>(ie., after 1989) able to explore the deep roots of the tendencies he had
>previously identified.
>>I can appreciate the desire to defend socialism against an apparent attack.
>>This is not one. Kornai would, I think, describe himself as a socialist.
> At one point, he would have; however, he shifted significantly from the
>50s through the 90s.
> in solidarity,
> mike
>Michael A. Lebowitz
>Economics Department
>Simon Fraser University
>Burnaby, B.C., Canada V5A 1S6
>Office: Phone (604) 291-4669
> Fax (604) 291-5944
>Home: Phone (604) 872-0494
> Fax (604) 872-0485
>Lasqueti Island: (250) 333-8810
Dr. Steve Keen
Senior Lecturer
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
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PO Box 555 Campbelltown NSW 2560
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