On Tue, 23 Jul 1996, Allin Cottrell wrote:
> On Tue, 23 Jul 1996, Duncan K Foley wrote:
>
> > > Paul:
> > > How would the shadow prices be calculated?
> >
> > Well, they are implicit in the optimization of a social welfare function
> > subject to constraints on the availability of resources.
>
> Shadow prices emerge from, for instance, the solution of the
> allocation problem as a linear programming exercise. But Paul and
> I have argued that this is not feasible for the economy as a whole.
> The complexity is just too high. On the other hand we've argued
> that the balancing of a disaggregated plan for a multi-million
> product economy (by finding the Leontieff inverse) is computationally
> feasible. And we are in effect saying (I think) that the
> embodied labour coefficients are a good first approximation to
> shadow prices. We have spelled this out, with some reference to
> the modes of calculation used in the USSR, in an article in the
> Revue Europeene des Sciences Sociales (which is also available on
> the Web in postscript of pdf at
>
> gopher://csf.colorado.edu:70/11/econ/authors/Cottrell.Allin
>
This seems to me to mix up "levels of abstraction". Are you saying that in
principle the socialist society should solve the full social welfare
programming problem, but because that's too hard they might use embodied
labor coefficients instead, because by a fortunate accident of the
structure of production the shadow prices might not be very different? Or
are you saying that in principle you want to use embodied labor
coefficients? (The parallel to our discussions about the transformation
problem is very close: the analogous question is whether in principle you
accept the need for the transformation, but believe that by a fortunate
accident of the structure of real production it doesn't make much
difference, or that you believe that the transformation is irrelevant to
the consistency of the labor theory of value.)
> > > In what units would the social priorities be measured in order to
> > > comensurate them with the shadow prices?
> >
> > This is, of course, very abstract and theoretical, but the idea would be
> > to measure relevant aspects of the allocation, including average levels of
> > consumption, provision for the future, and distribution (a la Marx's
> > remarks in his comments on the Gotha program), and establish a social
> > ranking among the goals that compete. Then maximizing the social welfare
> > function would yield shadow prices on whatever resources one regarded as
> > scarce (including human time and energy).
>
> Our suggestion is that consumer goods are marked with their 'value'
> (embodied labour-time), and also a (roughly) market-clearing price
> expressed in Owen-style labour-tokens (with which people are paid
> for their work, at an average rate of one per hour). Then the
> plan can be amended according to the algorithm, if P > V, order
> more of the good; if P < V order less. If P > V that says that
> people are willing to pay, in their own time, more time than it
> costs society to produce the thing. When I say the plan is
> 'amended' I mean that a new target vector of final outputs is
> generated, and the required vector of gross outputs is computed.
> All this is -- we argue -- computationally feasible. On the
> other hand "maximizing a social welfare function" directly is
> not. A lot of effort went into the latter in the USSR, and I
> think it was basically wasted. It was too "abstract and
> theoretical" to be of any practical utility to GOSPLAN.
Somehow this point of view seems to me to have been subjected to the
withering criticism of history already, but maybe I'm not seeing the whole
picture.
Yours,
Duncan