Re: [OPE] Kyn against the New Socialism of the 21st Century

Oldrich Kyn and I shared some time together at Berkeley - about the
early 70s - and we could be considered friends. I would share the
feeling that he was sympathetic (at that time) to improving actually
existing socialism. Perhaps he is now being a bit opportunistic about
his own history, or was not forthright at that time.

Someone like Taddeusz Kowalik in Warsaw is another matter. His basic
beliefs and efforts have been consistent and is quite critical toward
what Poland has become. In fact, he, along with others, fought to have
a Swedish type model installed in Poland in the early 1990s and failed.

Paul

=====
(V23) THE HIDDEN HISTORY OF 9-11, Seven Stories Press softcover, 2008 2nd ed
(V24) TRANSITIONS IN LATIN AMERICA .... (V25) WHY CAPITALISM SURVIVES CRISES
====> Research in Political Economy, Emerald Group, Bingley, UK
====> Paul Zarembka, Editor www.buffalo.edu/~zarembka
.

On 4/12/2010 2:38 PM, Paul Cockshott wrote:
> I have now read Kyn's protest.
>
> I have at no time indicated that Kyn was a current supporter of socialism. He did however do pioneering work on the computation of sectoral labour values using input output tables, this preceeded the work of Shaikh and his students at the New School, and it seemed therefore appropriate to give him credit for the work that he did in the 1960s. I had already gathered from his current position that he is no longer a socialist.
>
>
> ________________________________________
> From: ope-bounces@lists.csuchico.edu [ope-bounces@lists.csuchico.edu] On Behalf Of Alejandro Agafonow [a.agafonow@gmail.com]
> Sent: Friday, April 09, 2010 11:07 PM
> To: OPE@lists.csuchico.edu
> Subject: [OPE] Kyn against the New Socialism of the 21st Century
>
> I received this in my in-box
>
> A. Agafonow
> ---------- Forwarded message ----------
>
> Kyn against the New Socialism of the 21st Century
>
> By Oldrich Kyn
>
> On many Latino-American websites recently appeared articles connecting my
> name with the so-called "Socialism of the 21st Century". I intend to
> demonstrate here, that there is no basis for such a connection. Virtually
> all my publications and activity during the past 50 years can be shown to
> aim in the opposite direction.
>
> To make it clear I am not writing here about socialism in general, but about
> the two new but very similar theoretical designs of socialism, namely the
> "New Socialism" of Cockshott and Cottrell and the "Socialism of the 21st
> Century" by Heinz Dieterich Steffan who has been the adviser to Hugo Chavez
> of Venezuela and Rafael Correa of Ecuador.
>
> It seems that some people believe that both Venezuela and Ecuador are
> already close to achieving that kind of socialism. But I do not believe so.
> Some economic changes might be introduced and presented as steps in building
> it but it is not very likely that the building would ever be completed.
> True, it has some powerful supporters in those mentioned countries and
> possibly also in some others so that they may for a few years try to build
> it, but then they will most likely discover that they were mislead by the
> designers and that it is not going to work. Of course it is impossible, to
> predict the future with certainty, so I may be mistaken, however I have good
> reasons to believe that what I have said is true because my conclusions are
> based both on extensive knowledge of relevant parts of economic theory and
> many years of practical experience with various forms of socialist
> economies. Please note that by criticizing specifically these two new types
> of socialism I do not want to imply that some other types of socialism are
> either good or bad. The term 'socialism' is used for many very different
> forms of the economic and social system and not just those designed and
> created by Marxists.
>
> As I mentioned above, I am considering the "Socialism of the 21st Century"
> primarily because Heinz Dieterich in his article that appeared originally on
> the Rebelion website (www.rebelion.org<http://www.rebelion.org/> <http://www.rebelion.org<http://www.rebelion.org/>>) and soon
> after that was reproduced at about 40 other Latino-American websites used my
> name as if I were one of the contributors to his socialist fantasy. Here is
> the relevant paragraph from his article:
>
> "The glacial epoch of the worldwide debate provoked by the
> fall of the historical socialism has ended. .... Young scientists, veterans
> of the historical socialism, and social revolutionaries are being "dragged"
> towards the new "dawn of the reason," as Hegel would say. The contributions
> of the School of Scotland and of the School of Bremen that broke the imposed
> taboo, are related increasingly to the valuable experiences of the
> ex-socialist countries-- see the essay of the Russian economist Menshikov on
> Kantorovich's Economic Model, or that of Oldrich Kyn et al., a group of
> Czechoslovakian scientists linked to the Central Planning Office who, early
> on, in 1967 used input-output matrices to calculate the values of 25,000
> products for the Czechoslovak economy."
>
> This statement requires extensive comments but before that I should add just
> for information that the "School of Scotland" mentioned above means Paul
> Cockshott and Allin Cottrell and the School of Bremen includes among others
> Heinz Dieterich Steffan himself. Kantorovich is obviously mentioned because
> he developed the mathematical planning technique today well known under the
> name "linear programming". Cockshott, Cottrell and Dieterich wrongly believe
> that it can be used for the system of physical central planning in the
> economy without the market mechanism. My name is mentioned probably to
> demonstrate the possibility of labor value calculations as well as use of
> large scale computer calculations for central planning.
> The term "Socialism of the 21st Century" today appears on hundreds of
> various websites. On January 2, 2007 the Rebelión
> <http://www.rebelion.org/noticia.php?id=44104> website and one day after
> that also MRZine (the Monthly Review Website) brought the interview with
> Heinz Dieterich by Cristina Marcano that was published under the title "In
> Venezuela, Conditions for Building Socialism of the 21st Century Have Been
> Created".
> Here are some excerpts from this interview:
> "Q. Professor Dieterich<http://de.wikipedia.org/wiki/Heinz_Dieterich>, did
> you invent the concept of "Socialism of the 21st Century"
> <http://www.rebelion.org/dieterich/dieterich070802.pdf>?
> A. Yes. I developed it, beginning in 1996. It has been published with its
> corresponding theory in book form, from 2000 on, in Mexico, Ecuador,
> Argentina, Central America, Brazil, and Venezuela, and, outside Latin
> America, in Spain, Germany, The People's Republic of China, Russia, and
> Turkey. Since 2001, it has been appropriated all over the world.
> Presidents like Hugo Chávez and Rafael Correa use it constantly, and so do
> labor movements, farmers, intellectuals, and political parties."
> Dieterich then adds that it should be "a socialism in which the majorities
> have the greatest historically possible degree of decision-making power in
> the economic, political, cultural, and military institutions that govern
> their lives."
> On the question "What would be the decisive step that the President would
> have to take to arrive at 'Socialism of the 21s Century' in Venezuela?"
> Dieterich answered:
> "They are two: 1. to gradually replace the regulating principle of market
> economy, price, by the regulating principle of socialist economy, value,
> understood as time inputs (insumos de tiempo) necessary for the creation of
> a product; and 2. to advance the economic participation of citizens and
> workers at three levels: 1. at the macroeconomic level (e.g., national
> budget); 2. at the mesoeconomic level (municipality); and, 3. at the
> microeconomic level (enterprise)."
> In other words, Dieterich's "Socialism of the 21st Century" would be based
> on participatory (sometimes also called labor-managed) economy with prices
> determined not by supply and demand, but centrally according to the Marxian
> labor theory of value.
> This is quite similar to the type of the "New Socialism" Paul Cockshott and
> Allin Cottrell were promoting in their book written in 1989 that was also
> translated into several languages and published in respective countries
> during the years following 1990. In the recent article that appeared on the
> web Paul Cockshott characterized it in three points:
> 1. "The economy is based on the deliberate and conscious application of
> the labour theory of value as developed by Adam Smith and Karl Marx. It is a
> model in which consumer goods are priced in terms of the hours and minutes
> of labour it took to make them, and in which each worker is paid labour
> credits for each hour worked. The consistent application of this principle
> eliminates economic exploitation.
> 2. Industry is publicly owned, run according to a plan and not for
> profit. State retail enterprises for example, work on a break even rather
> than profit making basis.
> 3. Decisions are taken democratically, both at a local and a national
> basis. This applies in particular to decisions about the level of taxation
> and state expenditure. Such democratic decision making is vital to prevent
> the replacement of private exploitation with exploitation by the state."
> The crucial feature common to both discussed types of socialism is removal
> of the market generated prices and replacing them with the Marxian
> labor-values. But this creates a significant problem. While market prices
> are formed spontaneously by competition, the labor values need to be
> calculated. It is normal that there are several millions of different
> products in a typical country, and they are mutually interrelated, because
> some serve as inputs in the production of others. This means that not only
> enormous quantities of data would have to be collected but also that for
> calculation of labor-values it would be necessary to solve millions of
> simultaneous equations. Even with superfast computers, this would not be an
> easy task.
> The other aspect of both the "New Socialism" and the "Socialism of the 21st
> Century" creates similar problems. Centralized quantity planning without
> market requires not only collection of even incredibly larger quantity of
> data, but also a solution of additional millions and millions of
> simultaneous difference equations.
> Using my name as an evidence of feasibility of such type of value
> calculations and of possibility of quantitative central planning without the
> market mechanism is not only wrong but it is absurd. I have never had any
> contact with Dieterich and my first e-mail exchange with Cockshott happened
> only about a year ago. At that time it became quite clear to me that
> Cockshott and Cottrell and most likely Dieterich as well knew almost nothing
> about me and about my publications and activities during the past fifty
> years. They did not know what has been really done in mentioned price
> calculations of 1960's they knew nothing about my role in the critique of
> Marxian economics and in promoting the knowledge of the modern non-Marxian
> economics in Eastern Europe. They knew nothing about my critique of the
> non-market over-centralized socialism and about my active participation in
> the design and implementation of the reform reintroducing market into the
> Czechoslovak economic system. They did not know that after the Soviet
> invasion of Czechoslovakia in August 1968 I emigrated and after 3 years at
> Berkeley spent almost 40 years teaching economics at Boston University. They
> did not know that I continued with my activities by publishing, attending
> and organizing seminars and conferences, helping with research at OEI
> Munich, AERC Karachi, Pakistan, Ministry of Finance, Kuala Lumpur, Malaysia
> and several other places. They did not know that in early 80's Chinese
> government invited me to help with the transition to the market economy.
> Cockshott and Cottrell are still discussing with their friends the ways how
> to calculate labor values (see
> <http://www.ecn.wfu.edu/~cottrell/OPE/archive/> ) while together with my
> colleagues I published many papers and even a book about it long time ago.
> Several of these papers were in English and one even in Spanish. In addition
> to that our calculations were discussed at various international seminars
> and conferences, were mentioned in several publications and similar
> calculations were performed also in the former Soviet Union , Hungary,
> Poland ,Yugoslavia, China and some other countries.
> I am going to show here that my publications and activities were reasonably
> well known all around the world and therefore the fact that Cockshott and
> Cotrrell knew nothing about it and that Dieterich wrongly attributed to me
> the positive attitude towards Marxist theory of value and physical planning
> without the market does not testify well about their research abilities.
> Hundreds of my students from countries all around the world, both
> undergraduate and graduate, learned not only about our price calculations
> but also about my other publications and activities. Some of my students
> even performed price calculations or estimated econometric models as home
> assignments, using the data of their own countries. Many of those students
> have later reached leading positions in governments, banking systems,
> private organizations of their countries or in international organizations
> as the World Bank, IMF etc. This can be seen at
> <http://econc10.bu.edu/Old_students/oldstud_frame.htm>.
> Vaclav Klaus is now the president of the Czech Republic. This is how he saw
> the situation at the Prague Economic Institute in 1964, when he joined as
> research assistant and also started his Ph.D. studies:
>
> "... the Economic Institute ... was unusually liberal and only because of
> that I began to sense what is economics all about, .... There were regular
> seminars there, where the contemporary economics were discussed and where
> instead of doing what we were paid for, that is to criticize the non-Marxian
> economics, we were doing just the opposite. We studied non-Marxian economics
> and criticized the Marxian one. (I would like to mention the names of those
> who at that time were my one generation older colleagues and teachers, and
> from whom I learned a lot - J. Janis, M. Rumler, O. Kyn, V. Mueller, J.
> Chlumsky, L. Smetana and .... Rita Budinova - Klimova, our future ambassador
> to the USA.)" (V. Klaus p.342)
> Paul Craig Roberts, was in 1960's graduate student at the University of
> Virginia and wrote his dissertation with Warren Nutter the well known critic
> of the Soviet-type economy and my friend. Paul Craig Roberts attended five
> lectures of mine at the summer course about Economics of Eastern Europe in
> Tremezzo Italy. Even though it might seem questionable, whether I should
> think about him as my student, he wrote me recently that he would be honored
> if I did. Roberts early publications were about Marxism and economics of
> East European socialist countries, but he later became Assistant Secretary
> of the Treasury under Ronald Reagan
> <http://en.wikipedia.org/wiki/Reagan_Administration>and formulated the
> principles of the macroeconomic policy known under the names of Supply Side
> Economics or Reaganomics<http://en.wikipedia.org/wiki/Reaganomics>. Until
> now he is still one of the most prolific writers about economics, he was for
> some time the editor of Wall Street Journal, wrote frequently columns in
> Business Week and his syndicated columns are appearing very frequently on
> the web.
> At least 13 of my students were at different time ministers in governments
> of various countries:
> Santiago Levy Agazy, is today the deputy president and chief economist of
> the Inter - American Development Bank and for five years in the past was
> General Director, 'Instituto Mexicano del Seguro Social'and member of the
> Mexican Government.
> Arturo Montenegro, Minister of Economy Quatemala. Jorge Rodriguez Grossi,
> Minister of Economy Chile. Hugo Lavados, Minister of Economy Chile. Eduardo
> Bitran, Minister of Public Works, Chile. Fernando Aramburu Porras, Minister
> of Finance and Economy, Panama. Javier Comboni, Minister of Finance,
> Bolivia. Muhiuddin Alamgir, Minister, Bangladesh. Samuel Ashong, Minister
> of State at the Ministry of Finance
> and Economic Planning, Ghana. Abdul Hafeez Shaikh, Federal Minister for
> Privatization and Investment, Pakistan. Lee Suk Chae, Minister of
> Information and Communication, South Korea. Federico Morchio, Minister,
> Argentina. Soedradjad Djiwandono, State Minister of Trade, Republic of
> Indonesia.
> Another 11 students have had various functions in Ministries and Offices of
> the Governments of their countries:
> Raul Saez, Chile; Humberto Sarmiento, Mexico; Waqar Masood Khan, Pakistan;
> Aqdas Ali Kazmi; Pakistan; Kazi Mutawakkil, Pakistan; Rahul Khular; India;
> Satia Narayana Dash, India; Jonas Kipokola, Tanzania; Aniceto Weber, Brasil;
> Taufiq Ali, Bangladesh; Saadat Hussain Bangladesh;
> 10 students had or still have important positions in State Banks of their
> countries, 20 have had various positions in the World Bank, 6 in IMF, 5 in
> IADB, 34 have been professors at US universities and another 30 at the
> universities elsewhere in the world.
> In addition to that some top world economists were familiar with my
> publications and activities. I learned about that either from private
> discussions with them, public discussions at various meetings or from their
> publications. Among them were especially Milton Friedman, Paul Samuelson,
> Abba Lerner, Evsey Domar, Tjaling Koopmans, Samuel Kuznets, Alexander
> Gerschenkron, Alvin Hansen, Wassily Leontief, Leonid Kantorovich, J. R.
> Hicks, Zvi Griliches, Ludwig von Mises, Jan Tinbergen, Ronald Coase, Leif
> Johansen, Michio Morishima, Francis Seton, Peter Wiles, Alec Nove, Ljubo
> Sirc, Roy Harrod, Robert Sollow, Barbara Sollow, and many others.
> I am mentioning all that just to demonstrate, that my publications and
> activities were reasonably well known all around the world and therefore the
> fact that Cockshott, Cotrrell and Dieterich knew nothing about it and
> wrongly attributed to me the positive attitude towards Marxist theory of
> value and physical planning without the market does not testify well about
> their research abilities.
> In the rest of this paper I will document that my above claims are true and
> will also attempt to prove that the claimed economic features of the "New
> Socialism of the 21st Century" are inconsistent and that such an economy
> cannot work. For this purpose I will use extensive quotations from my
> publications as well as quotations of others about my views and activities.
> Let us start with mentioned price calculations. Together with my colleagues
> Lubos Hejl and Bohuslav Sekerka I was working during 1960's on the research
> project that involved mathematical formulation and empirical calculation of
> various types of prices that were at that time proposed and discussed in the
> Soviet Union and Eastern Europe.
> The concern about the choice of appropriate price formula for planning of
> prices resulted from the fact that the ad hoc price fixing by central
> governments had incredibly bad effects on the economies in Eastern Europe.
> Here is the quote from my paper " THE ROLE OF PRICES IN A SOCIALIST ECONOMY
> " presented at the Conference of International Economic Association" in
> Plovdiv Bulgaria December 1964, and published in M. C. KASER(ed.): ECONOMIC
> DEVELOPMENT FOR EASTERN EUROPE, MACMILLAN, 1968.
> "In fact, there was no planning of prices, for they remained
> constant until glaringly proved incompatible with evolving economic
> conditions; sets of such prices were more random in their relative values
> than those formed on the market, for they were a compound of errors in
> computations, false appraisals of the situation, and lack of information and
> subjective criteria on the part of decision-makers....
> An excessive centralization rendered a flexible price policy
> impracticable, for frequent adjustments of prices would have required a vast
> increase in the quantity of information processed at the center... But
> information on changes of demand was not available.....
> Among the results of the price system must first be counted
> disequilibrium on the market both in volume and structure of the supply and
> demand for consumers' goods. The producer is interested above all in the
> fulfillment of planned indicators and not directly in the production of
> commodities demanded by the consumer...
> Distorted price relations in retail trade induced an
> irrational structure of consumption: an excessively low price may waste raw
> material and labor - in extreme cases it has been known for a consumer to
> buy a finished product solely to extract its raw material.....
> Excessive centralism overloaded the administrative apparatus
> and created favorable conditions for the growth of bureaucratic
> tendencies...."
> In the book "Economic Devolution in Eastern Europe"
> (<http://www.bu.edu/econ/faculty/kyn/newweb/economic_systems/Economics/Comma
> nd_Econ/prices/prices_sirc.htm> )
> Ljubo Sirc writes (p.52):
> "In Florence, Professor A.J. Pashkov of the Soviet Academy
> of Sciences was trying to explain the pricing system in his country by
> defining the price as a measure of labor' and then telling the conference
> that, at present , 45 per cent of all Soviet prices are fixed by authorities
> of the constituent republics and not by central authorities. But this
> explanation did not satisfy the Czech participant, Oldrich Kyn, who wanted
> to know by what methods exactly the prices of millions of products are being
> established either by central or republican authorities. "
>
>
> And here is what I said there:
>
> ECONOMIC SYSTEMS& COMPUTATION OF PRICES, DISCUSSION AT THE
> CESES CONFERENCE IN FLORENCE 1966;
>
> I should like to demonstrate the experience of
> Czechoslovakia what problems are connected with centralized price setting of
> all prices. Let us suppose we have 2 to 3 million individual commodities
> which must have their prices set. We can follow the traditional method by
> which price reforms were carried out in the past or the more modern method
> making use of computers. This new method is being used in the present price
> reform taking place in Czechoslovakia.
>
> In the past price reforms took place approximately every
> five years. The calculation of new prices took about three to four years and
> thus practically filled out the entire period between the reforms. The
> traditional method of calculation was roughly as follows: first the prices
> of primary products such as coal, iron ore, etc. were calculated. On their
> basis the prices of derived products such as electricity, steel etc. were
> calculated and on their basis in turn, the prices of further commodities,
> such as machine-tools etc. The process of price calculation took place in
> successive stages up to the calculation of prices of the final products.
> This seems quite rational, but the problem is in feed-backs. As everyone
> knows, there exist in the national economy a great number of complex
> feed-backs. For instance the production of coal, electricity, etc. requires
> the use of the products of the machine-building industry. Therefore the
> correct price for coa1, iron ore etc. Cannot be calculated without knowing
> the price of machines. Since the traditional method could not take these
> feed-backs into account, price thus calculated cannot be considered as real
> production price. To achieve more correct prices it would be necessary to
> repeat the calculation several times, i.e. to do several iterations. But
> each iteration means a new calculation for two to three, millions products.
> Even if each iteration takes only two years and five or six iterations were
> sufficient for finding correct prices, the whole process would take too
> long. We have therefore come to conclusion that such a method is not
> adequate for the calculation of real production prices. Our experience has
> also taught us that after each general reform of prices, the results were
> quite out-of-date because in the meantime conditions had changed, and under
> new conditions, they were not real production prices any more.
>
> The second method of computing prices, that is the one using
> electronic computers takes less time, but it is impossible to prepare a
> program for a computer, which would compute two to three millions prices.
> With the use of electronic computers we must reduce the number of
> commodities for which prices are computed. According to our experience with
> the help of computers the duration of price reform can be shortened from two
> or four years to half a year or one year. But we obtain only average price
> indices for aggregate groups of commodities
>
> So neither does this method give us real and exact
> production prices for individual commodities. Our experience thus tells us
> that none of the known methods makes it possible to calculate individual
> prices exactly and sufficiently fast."
>
> =================================
> Going back to Kyn - Hejl - Sekerka research project of early 60's it did
> involve experimental computer calculations of the labor-value prices, but
> also the so called 'cost prices', 'prices of production', 'income prices'
> and the sets of two channel and three channel prices. One of the purposes
> was to compare these theoretical types to actual prices that were created by
> government price fixing. These computations were based on the Input-Output
> tables alternatively with 48 and 90 sectors and therefore did not -- and
> were not intended to -- prove the feasibility of calculations of labor
> values for millions of individual products and even less the desirability of
> using them as a tool of central planning in the Socialist economy. Actually,
> one of the results of our research was the demonstration that the
> labor-value prices recommended by some orthodox Marxists were not
> appropriate at all.
> The much larger task of calculating 25 000 prices was not any more part of
> our research project but was used by the Central Planning Office for the
> reform of wholesale prices in 1967. However, the price formula used in the
> price reform calculation was a special kind o two-channel prices and not
> labor-value prices. Clearly those 25 000 calculated "prices", were just
> average price indexes of the relatively large groups of individual products.
> Because computers were still not powerful enough at that time only six
> iterations could have been made and the results were far from being perfect.
> Because of that and also because of the distortion of data provided by
> firms the calculated prices were not sufficiently close to the market
> equilibrium and the whole price reform was considered a failure.
> Here is another quote from my above mentioned paper "THE ROLE OF PRICES IN A
> SOCIALIST ECONOMY":
> The group of Czechoslovak economists of whom the author is one postulates
> the need for reform firstly by rejecting the assumption that planning is
> incompatible with the price mechanism, and that socialism permits the
> central regulation of production without recourse to the market mechanism.
> This leads them to contend that central management is self-defeating, since
> the information needed to eliminate all uncertainty in decision-making
> becomes too costly and unwieldy. Any restriction of the amount of
> information transmitted to the center increases the uncertainty of the
> decision-making and hence the risk of adopting wrong decisions; the
> absorption of a considerable part of the labour force in administrative
> service decreases overall efficiency. They therefore suggest that a market
> mechanism automates in a coordinated manner a large part of these decisions;
> in addition, the producer is stimulated to satisfy the demands of the
> consumer. A market is thus prima facie desirable for the functioning of a
> socialist economic system. This, however assumes that prices be freely
> formed on the market and not set up by fiat....
> <http://129.3.20.41/home/wpa/public_html/econ-wp/dev/papers/0510/ROLEPRIC_fn
> .htm>
>
> Also I have myself made statements at several occasions - some of which
> appeared in various publications - that the centrally administered price
> reform was supposed to be the last case of fixing of all prices by the
> government in Czechoslovakia before making the prices again free on the
> market.
> In "Problems and Prospects of Czechoslovakia's New Economic Model." By
> Harry G. Shaffer (Published in Jan S. Prybyla: "Comparative Economic
> Systems" ) on page 339 is the following footnote 34.
> "Freely fluctuating market prices have, unfortunately, not
> been introduced yet," remarked Dr. Kyn to me. "Let us hope," he went on,
> "that the price reform in 1968 will be the last step in dictating prices
> from above."
> The transition to the market economy was the most important feature of the
> Czechoslovak economic reform of the second half of 1960's that lead to the
> well-known Prague Spring of 1968 and then unfortunately to the Soviet
> invasion that terminated it. The reason for the mentioned last central price
> reform was to eliminate the main price distortions so that the freeing of
> prices would not cause uncontrollable hyperinflation.
> Jaroslav Krejci in his article "Measurement of Aggregate Efficiency in the
> Czechoslovak Economy" ( Soviet Studies, Vol. 26, No. 4, Oct., 1974, pp.
> 591-603.)writes:
>
> "The quest for a 'rational price formula' pursued by
> Czechoslovak economists in the late sixties led to alternative
> recalculations of prices for individual branches of production which in
> turn showed the magnitude of 'economic irrationality' of the existing price
> structure."
> "For the English papers on this topic see. L. Hejl, O. Kyn,
> B. Sekerka, "Price Calculations", Czechoslovak Economic Papers 1967, no. 8;
> and O. Kyn, B. Sekerka, L. Hejl, "A Model for the Planning of Prices" in
> "Socialism, Capitalism and Economic Growth" (Cambridge 1967)
> This was also mentioned by Abram Bergson in his Review of "Socialism,
> Capitalism and Economic Growth. Edited by C. H. Feinstein, New York and
> London: Cambridge University Press 1967. The Bergson's review was published
> in the Journal of Economic Literature, Vol. 7, No. 1 (Mar., 1969) pp. 87-88:
> "Other contributors on planning include the young Czech
> economist O. Kyn, who together with two collaborators explains a technique
> of price formation, based on input-output analysis, that has been applied in
> the Czech reform, and which is apparently intended to improve on a system of
> prices which "became so deformed that it almost ceases to fulfill any
> rational economic function."
> As it was mentioned already above, the theory of labor-value has serious
> problems that became quite clearly visible during our price calculations.
> This is best described in our final publication in this area, namely the
> book "Model cenovych typu" (The model of price types) that was published in
> 1969, but because this book was not translated to English, I cannot use here
> direct quotations.
> The first serious problem is that not all kinds of labor are supposed to
> generate the same amount of "value" in one unit of time. Some kinds of labor
> are more complex than others and according to the theory they produce more
> value in the same time interval. Hypothetically, if you would order all
> types of labor according their complexity, you would get quite an extensive
> scale. There are no statistical data about the labor complexity and even
> worse, they can be hardly obtained, because it is not clear what properties
> of labor are supposed to produce more and how much more value. There were
> some attempts in past to create coefficients of complexity on the basis of
> the energy spent in work, but clearly that makes no sense. Smith assumed
> that it is competition in the market that generates spontaneously such
> coefficients. But without the free market it would be impossible to know
> them and therefore it would be impossible to obtain labor values by
> calculation.
>
> Adam Smith Wealth of Nations Chapter 5.
> But though labour be the real measure of the exchangeable
> value of all commodities, it is not that by which their value is commonly
> estimated. It is of difficult to ascertain the proportion between two
> different quantities of labor. The time spent in two different sorts of work
> will not always alone determine this proportion. The different degrees of
> hardship endured, and of ingenuity exercised, must likewise be taken into
> account. There may be more labor in an hour's hard work than in two hours'
> easy business ... It is more natural, therefore, to estimate its
> exchangeable value by the quantity of some other commodity than by that of
> the labor which it can purchase. In exchanging, indeed, the different
> productions of different sorts of labor for one another, some allowance is
> commonly made for both. It is adjusted, however, not by any accurate
> measure, but by the higgling and bargaining of the market, ..."
>
> Somebody may suggest creation of coefficients of complexity according some
> characteristics that labor process of the specific kind must have. But that
> would be arbitrary and still it would complicate the value calculations
> enormously.
> The problem is complicated further, by the theory assumption, that only the
> so called "productive" labor generates value and that many types of labor
> are in fact "non-productive". In times of Adam Smith and to some degree even
> of Karl Marx it may have seemed logical to define "productive" labor as the
> kind involving manual operations in the process of creating the physical
> products. The activity in trade, for example was assumed to be
> "non-productive", because no creation of new material products was involved.
> Similarly any work of accountants and managers etc. was "non-productive"
> because they were just thinking, reading, writing or talking and no manual
> labor in the process of creating products was involved. What about today? Is
> the sitting at the computer that controls the automatically operating
> machines that create the physical products productive or not? And what about
> producing computer programs, is it "productive" activity? Even more
> importantly the classical labor theory of value is based on the assumption
> that economics is a zero sum game that is the total value created at certain
> interval of time is given by the quantity of labor done by "productively
> working" population and if some "non-productive" people get piece of it then
> those who produced it must have gotten less by exactly the same amount. But
> the modern economics regard that as faulty, because the so called
> "non-productive" activities may in fact generate the additional value that
> nobody else is deprived of. Consider the following extreme example: certain
> essential consumer good is produced by farmers at one place in the country
> only. If it were not transported also to other places the local population
> would buy and consume only limited amount of it. So the trade activities
> that make this product available also to people elsewhere, add the value to
> the produced goods. In this sense the trade is also "productive". Similarly
> any information processing and decision-making activities would have been
> regarded as "nonproductive" by the classical labor theory of value. It seems
> to me, that it is more reasonable to consider improved information and
> positive decisions as creating additional value and not just as "steeling"
> from the so called "productive" workers.
> There is another significant problem with the classical labor-theory o
> value. According to Adam Smith and especially also according to Karl Marx
> the labor or more precisely the "labor power" (the ability to work) in the
> market economy is also a traded commodity. So labor power is supposed to
> have its own labor-value as well. How is this labor-value of the labor power
> determined? By the classical labor-value theory labor -value of the labor
> power is the quantity of labor that is needed to "reproduce" the ability of
> the worker to work. In other words to determine the labor-value of the labor
> power means to sum up the labor content of consumer goods needed to maintain
> the labor ability of workers and their immediate families (because it is
> necessary also to guarantee the availability of labor in future) and of all
> other absolutely necessary living expenses - as for example maintenance of
> their home - that guarantee the reproduction of the availability to work.
> Because the price of labor power is wage, the theory claims that under ideal
> conditions the wage is determined by the labor-value of the labor power. As
> a result the total value produced by the worker during one unit of time
> splits into two parts: 1) the so called "necessary labor", which is the
> amount of labor the worker gets back through the wage, and 2) the so called
> "super-value", which is the amount of labor appropriated by workers
> employer. The ratio of the "super-value" to the value of labor power is the
> so called rate of super-value that under capitalism is supposed to express
> the rate of exploitation. It is assumed that the rate of "super-value" is
> the same in all branches of the economy.
> But suppose that we are considering two kinds of labor: the first one of the
> complexity A and the second one of the complexity B. As mentioned above they
> are producing different quantities of labor-value per unit of time. Unless
> the proportions of the value produced by the unit of labor A to that
> produced by the unit of labor B is the same as the ratio of the "labor value
> " of the "labor-power" A to the "labor value" of the "labor-power" B, the
> rate of "super-value" for the types of labor A and B cannot be the same. It
> is illogical to assume that the complexity of labor is determined by the
> cost of reproducing labor-power and the labor theory of value is therefore
> inconsistent. If you really believe in the labor theory of value try to
> solve this paradox. Otherwise just give up and admit that the labor-theory
> of value is wrong. The implication of it would be that both the "New
> Socialism" and the "Socialism of the 21st century" are based on the
> incredible stupidity of their authors.
> The price calculations were only a minor part of my overall activities in
> 1960's. Those activities included also teaching economics at Charles
> University in Prague, research and publications in the fields 1) History of
> Economic Thoughts and specifically about non-Marxian economics, 2) Economic
> Cybernetics, 3) Mathematical Economics and 4) Econometrics. I have also
> written some lecture notes and chapters in several economic textbooks. In
> addition to that I have given lectures and participated in conferences,
> seminars and discussions at various places in Czechoslovakia and abroad. For
> several years I have worked part-time as the consultant in the Government
> Office for Prices. Finally I have participated actively in the preparation
> and implementation of the blueprint for the economic reform. Specifically I
> was in charge of the section on Price Policies.
> In all those activities I contributed to the criticism of the Marxian
> economics and specifically of the labor-theory of value. I tried also to
> provide information about important non-Marxian economic theories that were
> virtually unknown in Czechoslovakia at that time. I have never believed that
> modern industrial economy can function efficiently without the market
> mechanism. I was among the first few Czechoslovak economists who in the
> early sixties started to criticize openly the Soviet-type administrative
> central planning and argued for the return to the market economy. Of
> course, at that time Czechoslovakia was still ruled by the Communist party,
> and censorship of all publications was very thorough, so it was not possible
> to suggest directly the return to Capitalism. Instead we have argued for
> creation of the "Market Socialism" and as the idea of the market reform
> began to be accepted, we started to argue at least for privatization of the
> small scale enterprises. I am almost sure that if the Czechoslovak reform
> process were not interrupted by the Soviet military invasion, the process
> would lead also to the privatization of the middle scale and eventually
> maybe also of the large scale enterprises.
> After the Soviet invasion in the fall of 1968 I emigrated from
> Czechoslovakia and spent 3 years as the visiting research economist at
> Berkeley and then from 1971 until my retirement I had been teaching at
> Boston University, where I am still listed as emeritus professor of
> economics. During my stay in the USA I have continued in my activities.
> I had several hundred graduate students which among other things usually
> learned also about my experiences in Czechoslovakia including criticism of
> Marxian economics and the Soviet-type system of command planning. I should
> also mention that during my stay at Boston University, our Economics
> Department has improved considerably and in the recent years its rankings
> has reached positions usually between 10th and 25th place in the world. Many
> of our students have in the years after their graduation reached important
> positions in governments or central banks of their countries, in private
> organizations and firms, in international banks and organizations, or as
> professors at universities all over the world.
> In the USA I gave lectures, presented papers or participated in discussions
> at many universities, research institutes, seminars and conferences. I have
> been also involved in research, consulting and/or lecturing in many
> countries of Europe and Asia. At these occasions I frequently got in contact
> with leading economists, so that they were also aware of my activities and
> positions.
> All the above mentioned facts were brought here to show, that my positions
> and activities were already for quite a long time known to many economists
> around the world. It is, therefore, unbelievable, that Cockshott and
> Cottrell as well as Dieterich knew nothing about that and that Dieterich is
> completely inappropriately assigning me the important role in his image of
> the "Socialism of the 21st Century".
> Some evidence that what I have just said is actually true will be documented
> in the following parts of this paper.
>
>
>
>
>
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Received on Tue Apr 13 18:42:08 2010