Economics and planning

Posted: 21 August 2012 in Uncategorized
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We’ll fulfill five-year plan in four years!

Neoclassical economics has long been structured around the dichotomy between markets and planning as alternative mechanisms for the efficient allocation of resources. And, of course, neoclassical economists have long concluded that decentralized markets are better at that task than central planning.

The problem with that formulation is that it presumes there’s one essential economic problem—the efficient allocation of scarce resources—and that markets and planning are just different ways of accomplishing the same objective. In other words, it’s an approach that denies the role of history and social conditions, that different economic institutions—such as markets and forms of planning—arise under (and in turn serve to create) different historical and social conditions.

Now, Daron Acemoglu and James Robinson want to modify the discussion but keep the same method. In their view, “central planning is not about the efficient allocation of economic resources, it is about control.”

Central planning maximizes the extent of control that the state, and the people running the state, exercise. The desire to control others is a constant in history and is part and parcel of the construction of states. If the state can grab all the land and resources and control who and on what terms people get access to them, then this maximizes control, even if it sacrifices economic efficiency.

This sort of economic and political control — not Marxist ideology — is what central planning is all about.

What they do is substitute one essence—the efficient allocation of scarce resources—with another—control by the elites through the state. The result is that planning remains a singular phenomenon, which they find throughout history: in the Greek Bronze Age, among the Incas, and in the Soviet Union.

Many additional issues can be raised about their approach. Let me mention two. First, I actually think they let Marxism off the hook too easily since, as Jack Amariglio and I argued in Postmodern Moments in Modern Economics, while central planning may not be mentioned in Marx’s writings, there is a long tradition of modernist Marxism that has preferred the presumed order of central planning over the disorder of markets. As we wrote:

The relativism (one-sidedness), uncertainty, and disorder of capitalism are overcome by rational planning whose objective basis—the victory of the proletariat, with its full appreciation of the totality—guarantees in advance the superiority of its knowledge and practice.

Postmodern Marxist economists could not but regard this view as unhelpful and ultimately damaging in distinguishing between capitalism and socialism. For it is clear, to postmodern Marxists at least, that socialism has been and will be beset with the multiplicity of knowledges and the radical uncertainty that goes along with the contingency of events and the persistence of ideology. The debilitating effects that, as many Marxists have pointed out, have been visited both on peoples living under socialist regimes and on the very concept of socialism can be tied directly to the claim by the party or state to have privileged (and not partisan) objective knowledge has been considerable. Socialist planning, in our view, will always be marked by the mediation of different knowledges and subjectivities, and the resulting plan, a contingent act if there ever was one, may need to declare itself as partisan, provisional, and uncertain of its effects if it is to avoid the disasters that have befallen planning mechanisms that have been infused with modernist explanations and ideals, utopian though they may have been.

In this sense, the totalizing promise of rational centralized planning is a modernist one. The declared partiality, relativism, and disorder of planning are, in contrast, postmodern.

And there’s a second issue: while I have no doubt that, in particular instances, state planning has been used to enrich elites, when will Acemoglu and Robinson discover that markets, too, under different historical and social conditions, have been mechanisms whereby elites “control and extract resources from society”?

  1. […] of the problem: all our needs are social needs. (And as Jack Amariglio and I argued back in Postmodern Moments, the modernist Marxian argument that “planning can succeed where markets could not in […]

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