Perhaps we ought to start a thread on the problem of allocation and
planning in a socialist economy, since we seem to be drifting into a
discussion of it without much structure. I think this discussion will
inevitably also touch on different people's interpretation of the collapse
of the "socialist" regimes in the Soviet Union and Eastern Europe.
Here are some questions I have in this area:
1) Has the historical experiment of the "communist" regimes demonstrated
fundamental flaws in any system of centralized allocation of resources?
Has it validated Hayek's criticism of Lange on the ground that the real
function of markets is to force social actors to divulge private
information? Does it show that centralized planning mechanisms are
incapable of fostering viable innovation?
2) If centralized planning is still a viable option, how should it be
organized in principle and in practice. Should a social welfare function
embodying social priorities be used in principle to assign shadow prices?
What role do embodied labor coefficients have in a planning mechanism,
either as approximations to shadow prices or on their own? Should an
interest rate be charged in costing investment options?
3) Are there any credible alternatives to centralized planning schemes as
substitutes for commodity allocation methods? How would they reproduce
themselves socially?
Yours,
Duncan